© t madas depreciation. depreciation is the loss in value of certain items through usage, wear and...
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© T Madas
DEPRECIATION
© T Madas
Depreciation is the loss in value of certain items through usage, wear and tear, age etc.
Typical items subject to depreciation:• Cars and generally all vehicles• Expensive electric/electronic equipment• Factory Machinery
Depreciation is usually given as a percentage
Depreciation is calculated the same way we calculate compound interest.
© T Madas
A farm vehicle cost £40000 when new.Each year it depreciates in value by 20%
5
4
3
2
1
13107.2016384 x 0.816384
1638420480 x 0.820480
2048025600 x 0.825600
2560032000 x 0.832000
3200040000 x 0.840000
end of yearcalculationstart of year
The truck lost £8000 from its original value in a year.
Why is not sensible to say that it will lose £8000 every year?
What will its value be in 6 years time if that was true?
© T Madas
A farm vehicle cost £40000 when new.Each year it depreciates in value by 20%
5
4
3
2
1
13107.2016384 x 0.816384
1638420480 x 0.820480
2048025600 x 0.825600
2560032000 x 0.832000
3200040000 x 0.840000
end of yearcalculationstart of year
Originalvalue
depreciation as a % multiplier
years40000x (0.8)5
© T Madas
© T Madas
A factory bought a new piece of machinery for £80000.The machinery depreciates at the rate of 10% per annum.1. Calculate the value of the machinery after 6 years.2. After how many years will this piece of machinery be worth less than £8000?Originalvalue
depreciation as a % multiplier
years80000x (0.9)6
© T Madas
A factory bought a new piece of machinery for £80000.The machinery depreciates at the rate of 10% per annum.1. Calculate the value of the machinery after 6 years.2. After how many years will this piece of machinery be worth less than £8000?
80000x (0.9)6
© T Madas
A factory bought a new piece of machinery for £80000.The machinery depreciates at the rate of 10% per annum.1. Calculate the value of the machinery after 6 years.2. After how many years will this piece of machinery be worth less than £8000?
80000x (0.9)6
© T Madas
A factory bought a new piece of machinery for £80000.The machinery depreciates at the rate of 10% per annum.1. Calculate the value of the machinery after 6 years.2. After how many years will this piece of machinery be worth less than £8000?
80000x (0.9)6 £42515.28=
n = 10 80000 x (0.9)10 ≈ £27894.28
n = 15 80000 x (0.9)15 ≈ £16471.29
n = 20 80000 x (0.9)20 ≈ £9726.13
n = 21 80000 x (0.9)21 ≈ £8753.52
n = 22 80000 x (0.9)22 ≈ £7878.17
© T Madas