© t madas depreciation. depreciation is the loss in value of certain items through usage, wear and...
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![Page 1: © T Madas DEPRECIATION. Depreciation is the loss in value of certain items through usage, wear and tear, age etc. Typical items subject to depreciation:](https://reader036.vdocuments.us/reader036/viewer/2022081512/56649f265503460f94c3d230/html5/thumbnails/1.jpg)
© T Madas
DEPRECIATION
![Page 2: © T Madas DEPRECIATION. Depreciation is the loss in value of certain items through usage, wear and tear, age etc. Typical items subject to depreciation:](https://reader036.vdocuments.us/reader036/viewer/2022081512/56649f265503460f94c3d230/html5/thumbnails/2.jpg)
© 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.
![Page 3: © T Madas DEPRECIATION. Depreciation is the loss in value of certain items through usage, wear and tear, age etc. Typical items subject to depreciation:](https://reader036.vdocuments.us/reader036/viewer/2022081512/56649f265503460f94c3d230/html5/thumbnails/3.jpg)
© 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?
![Page 4: © T Madas DEPRECIATION. Depreciation is the loss in value of certain items through usage, wear and tear, age etc. Typical items subject to depreciation:](https://reader036.vdocuments.us/reader036/viewer/2022081512/56649f265503460f94c3d230/html5/thumbnails/4.jpg)
© 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
![Page 5: © T Madas DEPRECIATION. Depreciation is the loss in value of certain items through usage, wear and tear, age etc. Typical items subject to depreciation:](https://reader036.vdocuments.us/reader036/viewer/2022081512/56649f265503460f94c3d230/html5/thumbnails/5.jpg)
© T Madas
![Page 6: © T Madas DEPRECIATION. Depreciation is the loss in value of certain items through usage, wear and tear, age etc. Typical items subject to depreciation:](https://reader036.vdocuments.us/reader036/viewer/2022081512/56649f265503460f94c3d230/html5/thumbnails/6.jpg)
© 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
![Page 7: © T Madas DEPRECIATION. Depreciation is the loss in value of certain items through usage, wear and tear, age etc. Typical items subject to depreciation:](https://reader036.vdocuments.us/reader036/viewer/2022081512/56649f265503460f94c3d230/html5/thumbnails/7.jpg)
© 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
![Page 8: © T Madas DEPRECIATION. Depreciation is the loss in value of certain items through usage, wear and tear, age etc. Typical items subject to depreciation:](https://reader036.vdocuments.us/reader036/viewer/2022081512/56649f265503460f94c3d230/html5/thumbnails/8.jpg)
© 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
![Page 9: © T Madas DEPRECIATION. Depreciation is the loss in value of certain items through usage, wear and tear, age etc. Typical items subject to depreciation:](https://reader036.vdocuments.us/reader036/viewer/2022081512/56649f265503460f94c3d230/html5/thumbnails/9.jpg)
© 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
![Page 10: © T Madas DEPRECIATION. Depreciation is the loss in value of certain items through usage, wear and tear, age etc. Typical items subject to depreciation:](https://reader036.vdocuments.us/reader036/viewer/2022081512/56649f265503460f94c3d230/html5/thumbnails/10.jpg)
© T Madas