The value of a lake house at the end of six years is estimated to be $76,500.
What was the original cost of the house if the yearly rate of depreciation is 6.5% ?
Answers are posted below the wildlife photo. Please take your time.
A. $90,000
Let's consider the annual depreciation rate of 2.5% first. If this rate was applied for six years to the house multiply 6 times 2.5% to get a total depreciation of 15%.
Now let's subtract the 15% from 100% to get 85% or .85 which is represents the percentage of the original price which is $7,650.
Now, if we divide the 85% or .85 into the estimated depreciated price of $7650 we get $90,000, which is the original cost of the house.
Did you get stuck ? :-)
