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Depreciation of a Car

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You want to buy a certain car on your 25th birthday. The car sells currently for $25,000. You estimate that the price will increase by 10 percent per year until you are ready to buy. If you just turned 18 years old and can invest to earn 12 percent, how much must you invest at the end of each year to be able to purchase the car?

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Solution Summary

The expert examines depreciation of a car gift.

Solution provided by:
Sonia Agarwal, CA
Education
  • Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
  • Bachelor of Commerce, West Bengal University
Recent Feedback
  • "I got this feedback and I wanted to know if you can explain it to me. I noticed something within your workings which I believe is incorrect.  It looks like you've mistaken the Debt ratio for the Equity Multiplier.  You've done a calculation to determine Return on Equity (ROE) but if you take a look at the ratios provided for us you'll see ROE listed on the bottom line already.  You can use ROE, Profit Margin and Total Asset Turnover to figure out the Equity Multiplier amount.  Equity multiplier is not provided for us and we need to calculate it.  I really hope this is helpful to you.  "
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