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Economics, Energy Management and Conservation
Published in Radian Belu, Energy Storage, Grid Integration, Energy Economics, and the Environment, 2019
Straight-line depreciation is the simplest and most used calculation method, in which the real asset value at the end of the period that it generates revenue can be estimated, by expensing a part of the original cost into equal increments over the period. The real value of a good or asset, which can be zero or even negative, is its value at the time of disposal, removal or selling and is expressed by this relationship: () AnnualDepreciationExpenses=OriginalCost−RealValue at the EndN(in $/year)
Introduction
Published in Robert C. Creese, M. Adithan, B. S. Pabla, Estimating and Costing for the Metal Manufacturing Industries, 1992
Robert C. Creese, M. Adithan, B. S. Pabla
Depreciation is the method used for recovering the original cost of a capital investment (asset) through a series of annual deductions distributed over the economic life of the product when the product life is greater than one year. If the product life is less than a year, the product is treated as a current expense. Depreciation has a significant effect upon income taxes and the cash flow for the capital investment. Depreciation represents the reduction in value of the capital asset due to wear or technical obsolescence. Other causes of equipment failure may be due to accidents or the lack of repairs and/or maintenance, but these are premature failures and usually are handled in a different manner.
Engineering Economics
Published in Steven G. Penoncello, Thermal Energy Systems, 2018
Profits realized by a company are taxable. Depreciation reduces the taxes because the depreciation can be deducted from the profits before taxes are calculated. In any year k, the after-tax profit realized is given by, AAT,k=ABT,k−Tk
Assessing the characteristics and supporting factors that lead to logging machine value loss in the Southeastern United States
Published in International Journal of Forest Engineering, 2022
Emily B. Cook, M. Chad Bolding, Rien Visser, Scott M. Barrett, Brandon S. O’Neal
Value loss and other costing elements such as economic life and machine usage must be adequately estimated to make informed decisions on equipment sales and replacements (Matthews 1942; Cubbage et al. 1988; Smith and Munn 1998). To accurately estimate a machine’s economic value, the original purchase price is compared to the resale value (Srivastava et al. 2006; McConnell 2020). Depreciation schedule analysis allows the purchaser to recover the initial investment cost of the machine each year over its economic life. There are historical methods used to calculate depreciation for machine comparison purposes: straight line, sum-of-the-year’s digits, and declining balance. The straight-line method assumes that the value of the equipment decreases at a constant rate over the economic life. The declining balance method assumes that equipment does not lose value at a constant rate, but rather more rapidly at the beginning of its economic life and less toward the end. Finally, the sum-of-the-year’s digits method “assumes that the value of the equipment decreases at a decreasing fraction each year.” The fraction is estimated by considering the sum of the years estimated in the machine’s economic life as the denominator and each year owned being the numerator in decreasing order (Miyata 1980). These methods have advantages and disadvantages, but when used consistently, provide useful information for comparing machine alternatives over time.
Calculating commission fee for the private sector’s distribution of petroleum products, simultanusly with the proposal of changing Iran’s oil products market structure
Published in Energy Sources, Part A: Recovery, Utilization, and Environmental Effects, 2020
Seyed Taher Partovi Alanagh, Mohammad Ali Motafakker Aazad, Reza Ranjpour, Mohsen Pourebadolahan, Mehdi Asali
The useful life of equipment and facilities are assumed 20 years.The salvage value of equipment and facilities at the end of useful life is considered zero.Straight-line depreciation method is used to calculate depreciation cost.The discount rate of 20% is assumed.The average daily sales of each nozzle at the filling stations are considered to be 3000 liters. Due to the high sales of petroleum products, especially gasoline, in some filling stations of Iran, some experts believe that this amount should be 4000 liters per day, although the rates of charges are calculated with this amount of sales.The useful life cycle of the oil tankers are assumed 20 years.The salvage value of the oil tankers at the end of useful life is equivalent to 20% of their initial value.The average monthly performance of the oil tankers is assumed 6000 km.
Engineering Economics
Published in The Engineering Economist, 2018
Chapter 13 covers depreciation calculations by introducing four methods: production, straight-line, declining balance, and sum of the years digits. In a departure from popular texts, the modified accelerated cost recovery system method is not discussed specifically, and although the accelerated cost recovery system is mentioned when presenting declining balance, the percentage tables that usually accompany the subject matter are absent. However, the tables provided by the author to illustrate both yearly depreciation calculations and book value calculations are very clear and will likely be appreciated by students.