Phil is a builder who has purchased a large set of tools.
The value of Phil’s tools is depreciated using the reducing balance method.
The value of the tools, in dollars, after
- Use recursion to show that the value of the tools after two years,
, is $48 600. (1 mark)
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- What is the annual percentage rate of depreciation used by Phil? (1 mark)
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- Phil plans to replace these tools when their value first falls below $20 000.
After how many years will Phil replace these tools? (1 mark)
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- Phil has another option for depreciation. He depreciates the value of the tools by a flat rate of 8% of the purchase price per annum.
Let
be the value of the tools after years, in dollars. Write down a recurrence relation, in terms of
and , that could be used to model the value of the tools using this flat rate depreciation. (1 mark)
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