A machine depreciates by 20% each year

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Question from katie, a student:

the value of a machine depreciates by 20% each year.
How would i find what single decimal number to multiple the original value by to find its value after 2 years?
thank you :)

Hi Katie,

The machine loses 20% of its value every year. Suppose the machine is worth M dollars at the beginning of year 1. At the end of year 1 it has lost 20% of its value so its value at the end of the first year is 80% of M dollars, that is 0.80 × M dollars. Hence at the beginning of year 2 the machine is worth at is 0.80 × M dollars. What is it worth at the end of the second year?

Penny







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