Engineering Economic Analysis

Historical Depreciation Methods 343

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Consider the following:

Cost of the asset,B

Depreciable life, in years,N

Salvage value, S

$900

5

$70

Compute the straight-line depreciation schedule.

B- S 900 - 70

Annual depreciation charge=dt =- N = _ =$166

This situation is illustrated in Figure 11-2. Notice the constant $166dteach year for 5 years,
and that the asset has been depreciated down to a book value of $70, which was the estimated
salvage value.

FIGURE 11-2 Straight-line
depreciation.

. 166

Straight-Line Annual

Depreciation Charge

J

166

..........

-~!

1

,..

I I I 'S 1

1 2 3 4 5

Time, DepreciableLife =N(years)

Depreciation Sum of Depreciation Book Value at

Year, for Yeart, Charges Up to Yeart, the End of Yeart,

t t

t dt Ldj BVt=B- Ldj

j=l j=l

(^1) $166 $166 900 - 166= 734
2 166 332 900 - 332 = 568
3 166 498 900 - 498 = 402
4 166 664 900 - 664 = 236
(^5166830) 900 - 830= 70 =S
_R
$900
734
u::s^568
0 402
j:CI^0
236
70
0