Test 7 Section 3: #6

The key to getting this one is the phrase “at a constant rate.” The question gives us the original value of the equipment, $32,400, and tells us it loses value at a constant rate so that it’s worthless after 12 years.

The constant rate means it loses the same amount of value every year. Which means it loses \dfrac{\$32,400}{12}=\$2,700 per year.

So, four years from its purchase date, the equipment will be worth \$32,400-4(\$2,700)=\$21,600.

Another way to go is to recognize that 4 is 1/3 of 12, so after 4 years, the equipment would have lost 1/3 of its value, i.e., it would be worth 2/3 of its original value.


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