A car costs £10,000 and it has a depreciation policy of 15% each year, reducing balance method. what is the net present value at the end of year 3?
Year 1£10,000 * 15% = £1,500 (Depreciation for year 1)£10,000 - £1,500 = £8,500 (Net present value at the end of year 1)
Year 2£8,500 * 15% = £1,275 (Depreciation for year 2)£8,500 - £1,275 = £7,225 (Net present value at the end of year 2)
Year 3£7,225 * 15% = £1,083.75 (Depreciation for year 3)£7,225 - £1,083.75 = £6,141.25 (Net present value at the end of year 3)
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