General Mathematics HSC Modeling Depreciation Stage 6 Year

General Mathematics HSC Modeling Depreciation Stage 6 - Year 11 Press Ctrl-A ©G Dear 2009 – Not to be sold/Free to use 1

Modeling Depreciation (1/4) • Assets include things such as automobiles, computers, furniture, house and equipment. • These assets have a set amount of useful life. This means that an asset is not expected to last forever, and so its value depreciates over time. • The definition of depreciation is “the decline in the useful life of a fixed asset over time”. • The only asset that rarely declines in value is land. You Tube Video Press 2

Modeling Depreciation (2/4) The 2 main types of depreciation. $ a) Straight line depreciation. It loses a constant amount each period. $ b) Declining Value depreciation. It loses a varying amount each period. An exponential curve. Decay 3

Linear Depreciation (3/4) Find the equation that represents the depreciation shown in the table below left. 10000 V Value $ Time in Years New (0) $10 000 1 $9 500 8000 6000 2 3 $9 000 $8 500 4000 4 $8 000 2000 5 $7 500 V = V 0 – DT V = 10 000 – 500 T EXCEL 0 1 2 3 4 5 T Linear Depreciation Formula V 0 = Initial Value = $10 000 V = V 0 – DT D = Difference = $10 000 - $9 500 = $500 4

Declining Value Depreciation (4/4) Find the equation that represents the depreciation shown in the table below left. 10000 V Time in Salvage S = V 0(1 - r)n Years Value $ 8000 )n (10. 2 S = 10 000 New (0) $10 000 n S = 10 000 x 0. 8 1 $8 000 6000 2 3 $6 400 $5 120 4000 4 $4 096 2000 5 $3 287 Declining Value Depreciation Formula S = V 0(1 - r)n EXCEL T V 0 = Initial Value = $10 000 r = Depreciation Rate = 10 000 - 8 000 10 000 = 0. 2 0 1 2 3 4 5 5