Harold just bought a brand new car for $34,500, and he has been told by the dealer that in 4 years, it will be worth $19,900. Harold is wondering how much the car will depreciate year by year during that time and what it will be worth each year. Use the sum-of-years method to find out by answering the five parts below:

Part I: What will be the total depreciation of the car over the next 4 years?

Part II: How much will the car depreciate during the first year that Harold owns it? How much will the car be worth after 1 year?

Part III: How much will the car depreciate during the second year that Harold owns it? How much will the car be worth after 2 years?

Part IV: How much will the car depreciate during the third year that Harold owns it? How much will the car be worth after 3 years?

Part V: How much will the car depreciate during the fourth year that Harold owns it? How much will the car be worth after 4 years? Is this the same amount that the dealer said it will be worth after 4 years?

Answer rating: 100% (QA)

Part I The total depreciation of the car over the next 4 years can be calculated as follows Total depreciation Initial cost Salvage value Total depreciation 34500 19900 Total depreciation 14600 Theref... View the full answer