A new roof costs $10,000.Assume that the value of the roof depreciates 5% per year.If your roof is destroyed by fire after five years,then

Question

Quizplus · Accepted Answer

The depreciation after 5 years would be :
5% x 5 years = 25%
Therefore, the actual cash value after 5 years would be:
$10,000 - 25% of $10,000 = $7,500
The replacement cost would still be $10,000. So, if the roof is destroyed after 5 years, the actual cash value would be $7,500 and the replacement cost would be $10,000. Therefore, the best choice is A.

A New Roof Costs $10,000