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depreciation capital cost of the machines

Posted by Martine on January 22, 2002 3:43 AM

I need to make a sheet , the goal is we have 50 machines those machines increase in value the 1 year 17% the second year 10 % 3-4-5 also 10 % .
What is the formula for this also the machines are not all from the same year and is there a way that I can see the running value .
Thanks ,

Posted by Barrie Davidson on January 22, 2002 6:14 AM

Martine, do you mean the machines decrease in value (depreciate)? Are you only making the calculations for years 1 to 5?

BarrieBarrie Davidson

Posted by Joe Was on January 22, 2002 6:24 AM

There are two types of depreciation, "for replacement cost or reproduction cost." Reproduction cost is the most expensive to accomplish (the reproduction of old materials and technologies is more expensive than new products) thus the depreciation is greater per year than replacement cost depreciation. Each is calculated the same though:

Cost New in currency times.

Total economic life minus the remaining economic life, which equals the effective age in years.

The depreciation age (Effective age/Total economic life) is multiplied by the cost new to give the accrued depreciation.

When the Accrued depreciation is subtracted from the cost new you have the depreciated value.

The depreciated value is always less than the cost new and the depreciation is always the amount to subtract. Thus by definition a depreciated item cannot increase in value!

You could add to the depreciated value the current price of the item minus the depreciated value of the item to show how much you are saving by not replacing the item at this time, but you would not replace the item before its economic life and the replacement cost would be a cost to bear at the end og the economic life, so it is inappropriate to use this method. For taxes the government will not allow depreciated items to increase in value each year?

Could you be thinking of inflation or appreciation?

Inflation is the increase in the amount of currency and/or credit or the general rise in prices and the erosion of purchasing power. Appreciation is the result of excess demand over the supply of goods, which results in the general increase in value of goods. The price of goods is not the value of goods. The value of goods is the price the market is willing to pay, based upon demand. The price of goods is what the market is forced to pay for goods, based upon inflation.

Capitalization is a method used to convert an estimated single year's income or annual average of several year's income into a indication of value in one direct step. By dividing the income by an appropriate rate or by multiplying the income estimated by a market factor. Direct capitalization is market driven.

So, by your information it appears to me that you really want non-strait-line appreciation or some step-wise capitalization?

Please provide more information, as we cannot give you information based upon a wrong premise intentionally! JSW

Posted by Martine on January 22, 2002 7:01 AM

Yes Barrie , I need to make an depreciate value for the machine park , but they are not all from the same date some are from 1999 other bought last year there is a total of 77 machines , so I need to make it for the past 5 years , and also find a formula, to get montly the current value.
Thank you