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The salvage value will always be more in the case of written down value method as compared to straight line method. Presently written down value methods are given importance.
Straight line method of depreciation is that under which any asset is depreciated in equal amount for every year till salvage value. Formula for straight line method: Depreciation = (Cost price - Salvage Value)/Number of years
MACRS is better because it allows you to take bigger deductions in the early years of the project which is a time value benefit.
T = the depreciation life of an asset UDC = The Un-depreciated cost of the asset n= the nth year of the assets life A= 2 if T = 3, 5, or 7 A= 1.5 if T = 15, or 20 The MACRS rate for the nth year of the assets life is: If n = 1: MACRS Rate = 1/T If n > 1: MACRS Rate = A / T * ( 1 - 1 / T ) * ( 1 - A / T ) ^ ( n - 2 ) If MACRS Rate < Straight Line Method Rate: start using straight line DISCLAIMER: 1) This does not match exactly with the IRS Publication946 If you read that publication, they indicate that the actual formula does not match their MACRS tables. I suspect that their tables are built to control round off errors. The method below, differs from the IRS tables by no more than 0.01%. 2) There is not an actual formula, but I have this as a sub-routine in my computer written in C++. If you want, I could translate it into something a bit more generic such as BASIC. If there is requests, I can post the actual code. To Calculate MACRS Using UDA = UnDepreciated Amount The Basic MACRS = UDA / Number of years to Depreciate But, the Second and subsequent years are DOUBLED. So for an item of $1000, 5 year depreciation ( 60 months ), Bought sometime in 2001 Year 2001, the MACRS = 1000/5 = $200.00 -- UDA is now $1000-$200 = $800 Year 2002, the MACRS = 2*800/5 = $320.00 -- UDA is now $800 - $320 = $480 Year 2003, the MACRS = 2*480/5 = $192.00 -- UDA is now $480 - $192 = $288 Year 2004, the MACRS = 2*280/5 = $115.20 -- UDA is now $288 - $115.20 = $172.80 For you math majors, you might see that this is a log decay curve and goes on forever, never to end. But, the IRS has a neat solution. When the UDA is less than the first years depreciation ( In this case, $200.00 ) you use a straight line method. So... Year 2005, the MACRS = $115.20 -- UDA is now $172.80 - $115.20 = $57.60 Year 2006, the MACRS = $57.60 ( You are DONE ) ----------------------- NOTE: You must consider the Salvage Value of the property Therefore: UDA at the start is = The Cost of the Item - Salvage Value ----------------------- Reference: MACR Table: http://www.studyfinance.com/lectures/depreciation/macrs.mv IRS Pub 946: http://www.irs.gov/publications/p946/ch04.html
The straight-line method of depreciation depreciates a capital asset evenly over its useful life until it reaches its salvage value (i.e., the value at which the asset can be sold at the end of its useful life). As an equation: Annual S/L Depreciation = (Cost - Salvage Value) / Useful Life
Under written down balance method depreciation is charged from original value and after that on written down balance until useful life of asset and any amount remaining at the end of useful life is the salvage value.
Salvage value is defined as the value of the product after its useful life .In other words it is the value after depreciation. Salvage value also known as scrap value.
Salvage Value - [Tax * (Market Value - Book Value)
Initial Net Investment / (Annual expected cash flow + salvage value)
The formula for a straight line depreciation method is the Cost minus the Salvage Value over the Life in Number of Periods which will equal Depreciation.
The value of a salvage vehicle is roughly 60% of the value of a comparable car with a clean title.
NO, salvage value is subjective. The salvage price is usally set by bids. Depends. If it's salvage the price is very subjective. If it's salvage but reconstructed (i.e. roadworthy) it's typically worth 60% of the value of a comparable car with a clean title. Use kbb.com and edmunds.com to determine appx value.