EXPLANATION
Let's see the facts:
Purchase Price = $24,800
Depretiation = 12%/year
We should apply the formula for exponential decay wich is expressed as:
A = P(1-r)^t
A= value of the car after t years
t= number of years
P = Initial Value
r= rate of decay in decimal form
We have that A=unknown t=? P=24,800 r=0.12
Replacing terms:
A=24,800(1-0.12)^t
Now, the y-intercept is the value obtained when t=0, so substituting this on the equation give us the following result:
A=24,800(1-0.12)^0 = 24,800(0.88)^0= 24,800*1=24,800
The starting value is $24,800
