The most straightforward method you can use to calculate depreciation is to use the straight line method. As the name implies, the straight line method assigns depreciation evenly over the economic life of the asset. The starting amount is the asset’s purchase price, and the ending value is the asset’s salvage value. To calculate straight line depreciation, you use the SLN function.
- [Narrator] The most straightforward method…you can use to calculate depreciation,…is to use the straight-line method.…As the name implies, the straight-line method…assigns depreciation evenly over…the economic life of an asset.…The starting amount is the asset's purchase price,…and the ending value is the asset's salvage value.…If your asset has an economic life of 10 years,…and the salvage value of zero, for example,…it will depreciate in value by 10%…each year, until it reaches zero.…To calculate straight-line depreciation,…you use the SLN function.…
I'll demonstrate how to use that function in this movie.…My sample file is Straightline_02_01,…and you can find it in the chapter two folder…of your exercise files collection.…In this case, we're looking at a…standard model 3.2 gigabyte desktop computer,…with an initial cost of 1500 dollars,…and then a salvage value of 200 dollars,…which is what we assume we can sell the computer for…at the end of its useful economic life of five years.…With those values in place, let's go ahead…
- Recall what the type argument is used to determine when using the PMT function.
- Identify what the M stands for in the ACCRINTM function.
- Name the accounting rules used by the AMORDEGRC function to assign a depreciation coefficient to an asset.
- Recall what internal rate of return generated by the IRR function should be measured against to determine if it is a good investment.
- List the three regular intervals that coupon bonds pay interest at.
- Determine the function that provides a more conservative bond evaluation compared to the DURATION function.
- Explain what the RECEIVED function shows.
Skill Level Intermediate
1. Analyzing Loans, Payments, and Interest
2. Calculating Depreciation
3. Determining Values and Rates of Return
4. Calculating Bond Coupon Dates and Security Durations
5. Calculating Security Prices and Yields
6. Analyzing Simulation Results
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