Depreciation Flashcards

All 4 cards in this deck

What does depreciation mean?

A fall in the value of an item over time, usually by a given percentage of its current value each year.

What multiplier represents a decrease of 4% per year?

$0.96$, from $\dfrac{100-4}{100}$.

What are the steps to find the number of years for a value to fall below a given amount?

e.g. a £8000 car depreciating 20% per year — when is it worth less than £4000?

1. Write the multiplier: $0.8$
2. Multiply repeatedly, counting the years: $6400$, $5120$, $4096$, $3276.80$
3. First value below £4000 is at year 4, so 4 years

True or false? An item that loses 10% of its value each year for 3 years has lost 30% of its original value.

False. Each 10% is taken off a smaller amount, so the total loss is about 27.1%.