Assumptions and method
This is an illustrative allocation, not tax advice. Useful life and residual value need independent justification.
Test a scenario
Use the result in a decision
Use consistent currency, timing and price assumptions.
This is an illustrative allocation, not tax advice. Useful life and residual value need independent justification.
Set a baseline and change one assumption to compare outcomes.
A worked example
Follow the fixed teaching example
- Annual expense = (25,000 − 5,000) ÷ 5 = 4,000.
- Book value after two years = 25,000 − 2 × 4,000 = 17,000.
These illustrative inputs describe a project scenario, not a published benchmark. All monetary inputs use the same currency and price basis.
- Asset cost
- 25000
- Residual value
- 5000
- Useful life in years
- 5
- Elapsed years
- 2
- Annual straight-line expense
- 4,000
- Book value
- 17,000
Interpret the output only within the assumptions above. Changing the inputs changes the result; it does not validate the inputs.
Source & credit
Standard financial mathematics; no single inventor is asserted.
OpenStax: Principles of Finance, capital budgeting
This is independently written code and explanation of the underlying method. The linked publication, its diagrams and its trademarks remain its owner’s material; no permission to reuse them is implied.