1.5.2 Depreciation

What is meant by depreciation?

• Depreciation is where an item loses value over time
  • For example: cars, game consoles, etc
• Depreciation is usually calculated as a percentage decrease at the end of each year
  • This works the same as compound interest but with a percentage decrease

How do I calculate with depreciation?

• You would calculate the new value after depreciation using the same method as compound interest
  • Identify the multiplier (100 - % as a decimal)
    • 10% depreciation would have a multiplier of 0.9
    • 1% depreciation would have a multiplier of 0.99
  • Raise the multiply to the power of the number of years (or months etc)
    • 
  • Multiply by the starting value
• New value is 
  • A is the starting value
  • m is the multiplier for the depreciation 
  • n is the number of years
• If you are asked to find the amount the value has depreciated by:
  • Find the difference between the starting value and the new value