What is the true economic depreciation


Problem

It is difficult to ascertain precisely the decline in the value of most assets as they grow older. An exception is automobiles. Assume that a new car costs $5000; that its value at the end of one year is $4000, at the end of two years $3000, at the end of three years $2000; and that it loses $250 in value for each of the following eight years. What is the true economic depreciation? What is the present discounted value of this, assuming a 5 percent after-tax interest rate? What will be the depreciation allowances under the current system? What is the present discounted value of these depreciation allowances? (Cars are treated as five-year assets.)

The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.

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Microeconomics: What is the true economic depreciation
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