DEPRECIATION T Madas Depreciation is the loss in

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DEPRECIATION © T Madas

DEPRECIATION © T Madas

Depreciation is the loss in value of certain items through usage, wear and tear,

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

A farm vehicle cost £ 40000 when new. Each year it depreciates in value by 20% start of year calculation end of year 1 40000 x 0. 8 32000 2 32000 x 0. 8 25600 3 25600 x 0. 8 20480 4 20480 x 0. 8 16384 5 16384 x 0. 8 13107. 20 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

A farm vehicle cost £ 40000 when new. Each year it depreciates in value by 20% start of year calculation 1 40000 x 0. 8 32000 2 32000 x 0. 8 25600 3 25600 x 0. 8 20480 4 20480 x 0. 8 16384 5 16384 x 0. 8 13107. 20 Original value end of year 40000 x (0. 8)5 years depreciation as a % multiplier © T Madas

© T Madas

© T Madas

A factory bought a new piece of machinery for £ 80000. The machinery depreciates

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? Original value 80000 x (0. 9)6 years depreciation as a % multiplier © T Madas

A factory bought a new piece of machinery for £ 80000. The machinery depreciates

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? 80000 x (0. 9)6 © T Madas

A factory bought a new piece of machinery for £ 80000. The machinery depreciates

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? 80000 x (0. 9)6 © T Madas

A factory bought a new piece of machinery for £ 80000. The machinery depreciates

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? 80000 x (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

© T Madas

© T Madas

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