Homework Answers
A) Expressing the value of new Bulldozer in terms of function
where v = Value of Bulldozer
t = how many years old
we have two cash flows
1. at the start of the year cost of the Bulldozer (i.e, year 0) = $92450
2. at the end of life salvage value (year 18) = $14150.
converting these two cash flows into points (0, 92450) (18,14150)
slope = change in Y- Axis / change in X- Axis
=> slope = (14150-92450) / (18-0)
=> slope = -4350
this 4350 is also called as straight line deprciable amount per year i.e (cost of asset - salvage value)/ (life of the asset)
hence the equation is
v = 92450 - 4350t
B) Value of Bulldozer after 4 years i.e, t =4
Substitute t = 4 in above equation v = 92450-4350t
v = 92450 - 4350*4
v = 92450-17400
v = 75050
therefore Vale of Bulldozer after 4 Years is $ 75050
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