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How to determine a linear depreciation model?
The equipment manager at Walley's Widgets recently purchased a new production station for its assembly plant. The manager will invoke a linear model for depreciating this piece of equipment over a ten year period. If the machinery cost $338,000 and has an expected salvage or scrap value of $26,000, (a) construct a linear depreciation model and (b) determine the value of the machinery after eight years. [A formal algebraic solution is expected. Include a complete check of the answers.]
3 Answers
- ?Lv 41 decade agoFavorite Answer
V=$338,000-at, where V is value, t is time in years, and a is our fit parameter.
From the problem statement we know that the initial value is $338,000, and we know that occurs at t=0.
We also know that the machine has a value of $26,000 after 10 years, this means V=$26,000 when t=10.
Substitute to get:
$26000=$338000-a*10
a = $312000/10
a = $31200
So our depreciation eqn is V=$338000-$31200*t
V(8) is just a calculator exercise.
- 1 decade ago
So how much does it go down every year
That is the essential piece you are missing.
If it is 26,000 then
338,000-(26000 x 8)= $130,000
- ?Lv 45 years ago
(1) In 5 years, the boat lost $10,000 in value. If that trend continues, what would happen in the next two years?
