FLASHCARD: Ch. 4.5 - 4.6 (Math for Finance)

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What is the Straight Line Depreciation Formula?

Back

The Straight Line Depreciation Formula is used to calculate the depreciation of an asset evenly over its useful life. It is given by: \( \text{Depreciation} = \frac{\text{Cost} - \text{Salvage Value}}{\text{Useful Life}} \)

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What is the Slope Formula?

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The Slope Formula is used to determine the slope of a line, which represents the rate of change. It is given by: \( m = \frac{y_2 - y_1}{x_2 - x_1} \)

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How do you calculate the total depreciation time for a vehicle using a linear equation?

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To find the total depreciation time, set the depreciation equation equal to zero and solve for x. For example, if the equation is \( y = mx + b \), set \( y = 0 \) and solve for x.

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What does the slope represent in a depreciation equation?

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The slope in a depreciation equation represents the rate at which the asset loses value per year.

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What is the formula to calculate the age of a depreciated asset?

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The formula to calculate the age of a depreciated asset is: \( t = \frac{\log\left(\frac{y}{A}\right)}{\log\left(1-r\right)} \) where y is the current value, A is the original value, and r is the depreciation rate.

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What is the depreciation rate of a vehicle?

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The depreciation rate is the percentage at which a vehicle loses its value each year.

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How do you determine the depreciation of a vehicle over time?

Back

To determine the depreciation of a vehicle over time, use the formula: \( \text{Depreciation} = \text{Initial Value} - \text{Current Value} \)

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What is the significance of the salvage value in depreciation calculations?

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The salvage value is the estimated residual value of an asset at the end of its useful life, which is subtracted from the initial cost to calculate depreciation.

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What is the meaning of 'total depreciation'?

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Total depreciation refers to the complete loss of value of an asset over its useful life.

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What is the depreciation of a vehicle that originally costs $20,000 and depreciates to $5,000?

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The total depreciation is: \( 20000 - 5000 = 15000 \)