Table of Contents
Advertisement
CD Enter declining factor, press
SAVE t
.
CD Enter 100
(J
00% of depreciation), press
X
@
Enter number of
years,
press
+
to obtain multiplier.
@)
Press
STO.
®
Enter present value of asset.
@
Press
RC
,
press.to obtain first year's depreciation.
(f)
Press
-
to obtain remaining book value in first
year.
®
Repeat steps
@
and
(f)
to
obtain each succeeding year's deprecia-
tion and remaining book value until the book value is
equal
to or
less than the
salvage
value. In the latter case, the previous book
value is
reduced
by
the
salvage value to obtain the final year's
depreciation.
Sample Case: A fleet car has a
value
of $2500, a salvage value of $400
which is not deducted from the present value, and a life expectancy of
six years. If you are using the double declining balance method, what
is the amount of depreciation and book value for years 1-4?
See Displayed:
L
i:jl-------I ••
_
multiplier
------~
••
$
_
lst year depreciation
l
- - - - - - - - - - - - - - l ••
~
remaining book
value
- - - - - - - - - - - l ••
$
_
2nd year depreciation
1
- - - - - - - - - - - - - - 1 ...
$
_
remaining book value
-----------. . . $
_
3rd year depreciation
1- - - -
-- - - - - - - - - 1
....
$
_
remaining book value
----------~
. . $
_
4th year depreciation
r:1
------------~
••
$
_
remaining book value
Note that an asset cannot be depreciated beyond salvage value-there-
fore, depreciation
for year
5 would be
$93.83
and book value
$400.
Discounted Cash Flow Analysis
For capital budgeting purposes, it is often required that a discounted
cash flow
analysis
be performed to
see
if a particular
investment
is
at
least
as
profitable
as some
norm (often called the
cost
of capital or dis-
count
rate).
This
calculation finds the present values of all the future cash flows
(appropriately discounted by cost of capital) less original investment.
37
Advertisement
Table of Contents
