1. © T Madas DEPRECIATION

2. 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.

3. 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 20480 x 0.820480 25600 x 0.825600 32000 x 0.832000 40000 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?

4. © 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 20480 x 0.820480 25600 x 0.825600 32000 x 0.832000 40000 x 0.840000 end of yearcalculationstart of year Original value depreciation as a % multiplier years 40000x (0.8) 5

5. © T Madas

6. 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 depreciation as a % multiplier years 80000x (0.9) 6

7. © 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

8. © 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

9. © 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 = 1080000x(0.9) 10 ≈£27894.28 n = 1580000x(0.9) 15 ≈£16471.29 n = 2080000x(0.9) 20 ≈ £9726.13 n = 2180000x(0.9) 21 ≈ £8753.52 n = 2280000x(0.9) 22 ≈ £7878.17

10. © T Madas