A machine worth 10000 new and having a scrap value of 500 is

A machine worth $10,000 new and having a scrap value of $500 is to be depreciated over a ten-year life. What will be the value of the machine after 4 years? At what time will the machine be worth $5,000?

Solution

Answer a)

Find the line through (0,10000) and (10, 500).

Slope = (500 -10000)/(10-0) = -950

Using slope -950 and y-intercept (0,10000), equation of line is

y =-950x +10000

Plug in x=4, to find the value as

y =-950*4 +10000=6200

Thus, value of machine after 4 years will be $6200

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B)

set y=5000 and then solve for x as

5000=-950x +10000

0 =-950x +5000

950x =5000

x =5000/950

x=5.26

Hence about 5.26 years machine will have worth $5000