The value V, in dollars, of a machine t years after it was bought is 400 when t = 0, 300 when t = 1 and 225 when t = 2. Which equation models the data, and by what percent does the value fall each year?
- Differences: 300 − 400 = −100 and 225 − 300 = −75. They are not equal, so the model is not linear.
- Ratios: 300 ÷ 400 = 0.75 and 225 ÷ 300 = 0.75. They are equal, so the model is exponential with b = 0.75.
- The starting value is 400, so V = 400(0.75)t.
- Percent decrease each year = 1 − 0.75 = 0.25 = 25%.
Answer: V = 400(0.75)t; the value falls by 25% each year.