Hello. I am working on a capital budgeting problem and I am trying to figure out how to get depreciation values by using DDB (Double-Declining-Balance) Depreciation. Actually, my professor gave me the values, but I am trying to figure out how to work it out.
Product costs 50,000
Salvage value: 10,000
Cash flows: Year 1: 10,000 Year 2: 12,000 Year 3: 12,000 Year 4: 12,000 Year 5: 10,000
Here is what I have done so far:
I have gotten the depreciation rate by using the formula (1/life) * 2
So, (1/5) * 2 = 40%
ddb
Year 1: .40 * 50,000 = 20,000
Year 2: .40 * (50,000-20,000) = 12,000
Year 3: .40 * (50,000-32,000) = 7,200
I am stuck on Year 4..
The depreciation value I was given by my professor is 800, but when I work it out..
.40 * (50,000-39,200) = 4320
Can anyone explain to me what I am doing wrong?
Also, why is the depreciation 0 in the last year (year 5)?
If anyone can offer me some help, I would really appreciate it!
Thanks.
Product costs 50,000
Salvage value: 10,000
Cash flows: Year 1: 10,000 Year 2: 12,000 Year 3: 12,000 Year 4: 12,000 Year 5: 10,000
Here is what I have done so far:
I have gotten the depreciation rate by using the formula (1/life) * 2
So, (1/5) * 2 = 40%
ddb
Year 1: .40 * 50,000 = 20,000
Year 2: .40 * (50,000-20,000) = 12,000
Year 3: .40 * (50,000-32,000) = 7,200
I am stuck on Year 4..
The depreciation value I was given by my professor is 800, but when I work it out..
.40 * (50,000-39,200) = 4320
Can anyone explain to me what I am doing wrong?
Also, why is the depreciation 0 in the last year (year 5)?
If anyone can offer me some help, I would really appreciate it!
Thanks.