A+ » VCE » Further Maths U3 & 4 Master Notes » A2 Recursion and Financial Modelling » 1.2 Forms of Depreciation

1.2 Forms of Depreciation

Flat Rate Depreciation

  • Flat rate depreciation occurs when the value of an asset decreases by a fixed amount every period (i.e. no interest occurs).
  • Graphs of flat rate depreciation are linear.
  • The recurrence relation formula describing flat rate depreciation is:

A_{n+1}=d+A_{n}

Note: as this is depreciation: d<0. Consequently, any graphs showing flat rate depreciation will have a negative slope.

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