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Sustainability 3

The document discusses methods for calculating salvage value and depreciation of projects and assets. It provides formulas and examples to demonstrate how to calculate salvage value based on original price and depreciation over years, and how to calculate annual depreciation by applying a depreciation rate to the depreciable basis.

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Tara Nahro
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19 views13 pages

Sustainability 3

The document discusses methods for calculating salvage value and depreciation of projects and assets. It provides formulas and examples to demonstrate how to calculate salvage value based on original price and depreciation over years, and how to calculate annual depreciation by applying a depreciation rate to the depreciable basis.

Uploaded by

Tara Nahro
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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 If no specific data is available to calculate the salvage value, it is assumed to be

zero.
 The general formula/way to calculate salvage value is:
Salvage Value = P – (I * Y)
where P = original price, I = depreciation, Y = number of years
 There are several methods for calculating or estimating the salvage value. For
example, the Federal Highway Administration uses the following for pavements:
 Salvage value=[1-(actual life of alternative/expected life of alternative)]×cost of
alternative
 Salvage value=[CLR × remaining life of last resurfacing/service life of last
resurfacing] + CRI
 where ,CLR is cost of last re-surfacing, CRI is cost of lower asphalt layers.
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 What is the Depreciation of project?
Depreciation of project refers to the process of reducing the recorded cost of a project
in a methodical way till the time when the value of the project either becomes zero or
reaches its salvage value. It allows us to map the revenue(say in the form of lease
rental)
generated during a period to the corresponding expenses.
 How to Calculate it?
Step 1: The Depreciable Basis for Building = Overall Combined Price –
Purchase Consideration of Land – Salvage Value of Building
Step 2: Rate of Depreciation = 1 / Useful Life
Step 3: Depreciation of Building = Rate of Depreciation * Depreciable Basis for Building
(step 1 * step 2)

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▪ Numerical 1
Let us take the simple example of a building bought for $100,000 and is estimated to have a salvage
value of $8,000. Determine the annual depreciation of the building if the applicable rate of depreciation
is 10%.
Solution:
Given,
Purchase price = $100,000
Salvage value = $8,000
Rate of depreciation = 10%
Now, the depreciable basis of the building can be calculated as,
Depreciable Basis = $100,000 – $8,000 = $92,000
Now, the calculation will be –
Annual depreciation= $92,000 * 10% = $9,200
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▪Numerical 2
Let us take the example of a building bought by XDE Inc. to illustrate the concept of
depreciation. The property was bought for $300,000, and it includes the purchase
price of the land, which is $100,000. The building is estimated to have a useful life
of 20 years, and at the end of the 20 years, the building is expected to have a
salvage value of $10,000. Determine the annual depreciation of the building based
on the given information.
Solution:
Given,
Overall combined price = $300,000
Purchase consideration of land = $100,000
Salvage value of building = $10,000
Useful life = 20 years
Rate of depreciation = 1 / 20 = 5%
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Now, the depreciable basis of the building can be calculated as,
The depreciable basis = $300,000 – $100,000 – $10,000 = $190,000
Now, calculation will be ,annual depreciation=$190,000 * 5% = $9,500

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 “Economic sustainability is about ensuring that our economy can
continue to thrive and provide for our needs now and in the future.
However, there are several barriers or challenges that can make it
difficult for economies to achieve this long-term sustainability.“
 1. Finite Resources:
• Resources like oil, minerals, and water are limited and can be
exhausted.
• Overuse of these resources without planning for the future can lead to
shortages and economic instability.

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 2. Environmental Degradation:
• Human activities such as pollution and deforestation harm ecosystems.
• Damage to the environment can disrupt essential services like clean air
and water, affecting economic activities.
 3. Climate Change:
• Climate change causes extreme weather events like hurricanes and
droughts.
• These events damage infrastructure, disrupt agriculture, and lead to
economic losses.

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 4. Income Inequality:
• When wealth is unevenly distributed, it can lead to social unrest and
reduced consumer spending.
• Limited access to education and healthcare for lower-income groups can
hinder economic mobility.

 5. Lack of Access to Basic Services:


• Inadequate access to education, healthcare, and sanitation limits human
potential.
• Without these services, individuals may struggle to participate fully in
the economy.
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AIR-TO-WATER INNOVATIONS
One of the most exciting examples is emerging technology that can
extract water from the air. Several companies have developed or are
working on these types of innovations. For example, Zero Mass Water’s
system, which is powered by solar panels, captures air with a fan, filters
out dust and pollutants, and separates out the water. It has been installed
in more than 40 countries.
These types of systems are economic sustainability in action: a
compelling, innovative product offers economic benefits to the
manufacturer while also providing enormous environmental benefits, such
as reliable access to safe water (which 2.2 billion people lack worldwide)
and reduced use of plastic.
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 GROWTH OF RECYCLING
✓ Recycling is still one of the best ways to reduce your carbon footprint. Today, a
variety of companies have made a business out of recycling or its counterparts: up-
cycling, down-cycling, e-cycling, and pre-cycling. These include local recycling
centers, websites like E-bay, vintage and pre-owned clothing shops, and apps such
as LetGo.
✓ In this vein, some communities have committed to economic sustainability. For
example, Kamikatsu, Japan, started working toward a zero-waste goal more than 20
years ago. Today, residents can separate their household waste into an incredible 45
categories. They compost food waste, reuse as many things as possible, and wash
things like plastic bags and bottles so they can easily be recycled.
✓ Although unanticipated challenges have kept Kamikatsu from achieving zero waste,
they recycled 81% of their waste in 2016. Considering the national average in Japan
is just 20%, this is a significant achievement and a model for any community that
hopes to reduce its landfill waste.
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 MICRO-FARMING
✓ Micro-farming, also known as urban farming, is farming on residential or commercial
property of less than five acres. Micro-farming is a relatively easy way for a
community to improve the food security of its residents and boost local economic
growth while benefiting the environment.
✓ Each micro-farm offers benefits such as reduced carbon emissions (because food
doesn’t have to be transported), less use of pesticides and herbicides, and better
public health. When a micro-farm replaces a grass yard, the farmer also ensures he or
she is using less water and providing an enticing area for pollinating insects.
✓ Micro-farming organizations have popped around the globe in the last several years.
One example is Fleet Farming in Orlando, an organization that encourages
homeowners to transform their lawn space into “edible landscapes” to make healthy,
affordable food more convenient and to educate the community about sustainable
food growth. The group offers professional landscape consultation and installation,
then uses part of those profits for community outreach and education.

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SOLAR ENERGY EXPANSION FOR LOW-INCOME FAMILIES
California’s Solar Initiative (CSI) is a state-run program that gives low-income
families the opportunity to add solar panels to their homes, with the goals of
decreasing overall energy usage, helping families enjoy lower energy bills, and
reducing the cost of solar energy.
CSI has been a huge success. The program’s original goal was to install 1,940
megawatts of solar capacity at customer sites. As of the end of 2019, it had
surpassed 9,600 megawatts of capacity, with solar panels installed at more
than 1 million customer locations throughout the state.

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