Depreciation Flashcards

All 4 cards in this deck

What does it mean for a value to depreciate?

Its value falls over time, usually by a fixed percentage of its current value each year.

What is the multiplier for a depreciation of 15% per year?

$0.85$, since $100\% - 15\% = 85\%$ of the value remains.

What are the steps to find the original value when you know the value after $n$ years of depreciation?

e.g. worth £8100 after 2 years of 10% depreciation per year

1. Yearly multiplier: $1 - 0.1 = 0.9$
2. Multiplier for the period: $0.9^2 = 0.81$
3. Divide the final value by it: $8100 \div 0.81 = £10\,000$

True or false? A car whose value depreciates by 20% each year has lost 40% of its value after 2 years.

False. The multiplier is $0.8^2 = 0.64$, so it has lost 36% of its value.