Question

A new machine purchased by a firm has an initial cost of $30,000, annual operating cost of $1,000 per year, and a salvage value of $5,000 after a 9 years recovery period. The firm uses MARR of 15% per year. Determine a) the depreciation charge at year 4, and b) the book value at year 4 using the Straight Line (SL) method.From the information in Q6, calculate a) the depreciation charge at year 4, and b) the book value at year 4 using the Double Declining Balance (DDB) method. Plot the two lines from both SL and DDB from Q6 and Q7 (you may use excel). The x-axis is the number of years up to the recovery period, while the y-axis is the book value (BV). Note that the book value for DDB cannot drop below the salvage value.

Only do the plotting, i know the rest.

Answer 1

Initial Cost=C=$30000

Salvage=S=$5000

In case of SL depreciation method

Depreciation per year=DVn=(30000-5000)/9=2777.78

Depreciation rate in case of DDB=200%/9

	Book Value
Year, n	SL	DDB
	BVn=BV(n-1)-Dn	BV=BVo*(1-200%/9)^n
0	30000.00	30000.00
1	27222.22	23333.33
2	24444.44	18148.15
3	21666.67	14115.23
4	18888.89	10978.51
5	16111.11	8538.84
6	13333.33	6641.32
7	10555.56	5165.47
8	7777.78	5000.00
9	5000.00	5000.00