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Unformatted text preview: The expression for ( ) depends on the accounting method used and below we show how to calculate ( ) under
straight line depreciation and declining balance depreciation methods. For each depreciation method we also show
expressions for ( ) the value of capital at time in terms of the “parameters”: ( ) the purchase price; ; and the
useful life of the capital. 9
ECO 204 Chapter 12: a Firm’s Cost Minimization Problem (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. 3. Calculating ( ) and ( ) in terms of parameters by the Straight Line Depreciation Method
In the straight line depreciation method, ( ) the depreciation cost in each period is a constant dollar amount. First,
accountants and economists, actually, economists and accountants stipulate a value for ( ) the
“salvage/terminal/scrap” value for the capital at time (i.e. what the capital is worth on the market at the end of its
useful life). Then the straigh...
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- Fall '14