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

2 Modeling Depreciation (1/4) Assets include things such as automobiles, computers, furniture, house and equipment.Assets include things such as automobiles, computers, furniture, house and equipment. The only asset that rarely declines in value is land.The only asset that rarely declines in value is land. The definition of depreciation is “the decline in the useful life of a fixed asset over time”.The definition of depreciation is “the decline in the useful life of a fixed asset over time”. 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.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. Press You Tube Video

3 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

V T Linear Depreciation (3/4) Linear Depreciation Formula V = V 0 – DT Find the equation that represents the depreciation shown in the table below left. Time in Years Value $ New (0)$ $ $ $ $ $7 500 V 0 = Initial Value D = Difference = $ $9 500 = $500 V = V 0 – DT V = – 500T EXCEL

V T Declining Value Depreciation (4/4) Declining Value Depreciation Formula S = V 0 (1- r) n Find the equation that represents the depreciation shown in the table below left. Time in Years Salvage Value $ New (0)$ $ $ $ $ $3 287 V 0 = Initial Value r = Depreciation Rate = = $ S = V 0 (1- r) n = 0.2 S = ( )n)n S = x 0.8 n EXCEL