Answer:
V = -80,000*t + 1,000,000
Step-by-step explanation:
Given:
- The original cost V_i = $1,000,000
- Scrap Value V_f = $200,000
- Total number of years n = 10
Find:
Using straight-line depreciation, find the equation for the value V in terms of t, where t is in years.
Solution:
- The straight line depreciation method means their is a linear relationship between the value of building and time elapsed till useful life. The linear relationship takes a form:
V = m*t + C
Where,
V: It is the current value of the building
m: The rate at which value increase or decrease with time t
C: The initial value of the building
- We will compute constants m and C as follows:
m = (V_f - V_i) / ( 10 - 0 )
m = (200,000 - 1,000,000) / 10
m = - $80,000/year
C = V_i = $1,000,000
- Plug the values of the constants evaluated above in the linear expression:
V = -80,000*t + 1,000,000
