Damon runs a swim school.
The value of his pool pump is depreciated over time using flat rate depreciation.
Damon purchased the pool pump for $28 000 and its value in dollars after `n` years, `P_n`, is modelled by the recursion equation below:
`P_0 = 28\ 000,qquad P_(n + 1) = P_n - 3500`
- Write down calculations, using the recurrence relation, to find the pool pump's value after 3 years. (1 mark)
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- After how many years will the pump's depreciated value reduce to $7000? (1 mark)
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The reducing balance depreciation method can also be used by Damon.
Using this method, the value of the pump is depreciated by 15% each year.
A recursion relation that models its value in dollars after `n` years, `P_n`, is:
`P_0 = 28\ 000, qquad P_(n + 1) = 0.85P_n`
- After how many years does the reducing balance method first give the pump a higher valuation than the flat rate method in part (a)? (2 marks)
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