Fixed Declining Balance

  • Thread starter Thread starter tom boone
  • Start date Start date
T

tom boone

The DB formula doesn't yield the required $50,000 salvage
value at the end of 10 years. Instead, it gives $50,161.21.

Cost: $450,000
Lifetime: 10
Salvage: $50,000

Can someone explain what I'm doing wrong?
 
As explained in XL Help, the rate for the DB function is rounded to
three decimal places. To get exactly the salvage value, use

rate = (1-((salvage/cost)^(1/life)))

and (assuming first and last years have 12 months of depreciation:

E1: =cost * rate
E2: =(cost - SUM(E$1:E1))*rate

copy E2 down to E10.

then cost-SUM(E1:E10) will give exactly the salvage.
 
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