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Lesson 3.6

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5 views

Lesson 3.6

Uploaded by

FS - John Nimar Baral
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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Lesson 3.

6: Appreciation and Depreciation

Learning Objectives
At the end of the lesson, you(student) should be able to:

1. Gain an understanding of appreciation and depreciation


2. Calculate the amount when there is any appreciation(growth) or depreciation (decay) in
an item's value.

Materials and Equipment Needed


1. Lecture Notebook
2. Assessment Notebook
3. Black ballpen
4. Intermediate paper

Learning Activities (Activating Prior Knowledge)


This activity allows you to gain an understanding of the concept of appreciation and
depreciation.

Photo sources: https://tinyurl.com/yceu9zophttps://tinyurl.com/y93pd396

Your parent bought a house and a car three years ago, and they want to sell them this
year? What will they do and how much will they sell your house and car?

Learning Probe (Analysis)


Use your assessment notebook to answer this part.
Answer the following:
You bought a computer set worth 25,000 pesos and decided to sell it after three years.
How much will your computer set be?
An apartment was bought for 34,000 pesos in 2018 with an appreciated value of 1.5 %
each year. How much will the apartment be by 2021?

Learning Time (Acquire New Knowledge)


What is the difference between appreciation and depreciation?
Appreciation is a term used to indicate a value is increasing over time. Like the value of
a house usually increases with time. Therefore, its value is said to appreciate.
Depreciation is a term used to indicate a value is decreasing over time. When we are
calculating depreciation, you subtract from the initial amount instead of adding each year.

Appreciation is when an item's value increases, and depreciation is when an item


decreases in value. The rate at which an item appreciates or depreciates is usually given as a
percentage. This is given as an annual rate, which means it will be applied at the end of each
year.

Some things that depreciate: Cars, Appliances, Computers and smartphones, Clothes and
Entertainment items. While things that appreciate are homes and investments.

Formula to calculate value:

%
Value = Starting value (1 + )n (Appreciation)
100
% n
Value = Starting value (1 - ) (Depreciation)
100
Where,
% = percentage increase/decrease
N = term of calculation (years/months/days)
Starting value = initial value or price

Example 1:
A vacation house is bought in 2015 for 60,000 pesos. If it increases in value by 5% each
year, how much is it worth in 2019?
Given: % = 5 %
N=4
Solution:
5%
Value = Starting value (1 + 100 )n
5%
Value = 60,000 (1 + 100 )4

Value = Php 72,930.00


Therefore, the vacation house will be worth 72,930 pesos in 2019.

Example 2:
A car is bought for 72,000 pesos. If it decreases in value by 1% each month, how much is
it worth after a year?

Given: % = 1%
N = 12
Solution:
1% n
Value = Starting value (1 + )
100
1%
Value = 72,000 (1 - 100 )12

Value = Php 63,819.00


Therefore, the car is worth 63,819 pesos after a year.

Example 3:
Your best friend bought a house for Php200,000 and five years later sold it for
Php250,000. What is the rate at which the house is appreciated?

Solution:
The formula for this type of problem has two parts:
New value – old value = change in value
Change in value ÷old value = percent of change in value
Php 250,000 – Php 200,000 = Php 50,000
Php 50,000 ÷ Php200,000 = 0.25 or 25 percent
Hence, the house appreciated by 25 %.

Example 4:
A different type of problem deals with a decrease in value. You bought a house for
Php200,000 and five years later sold it for Php 150,000. By what percentage did it depreciate?

Solution:
The formula for this type of problem also has two parts:
Old value – new value = change in value
Change in value ÷old value = percent of change in value
Php 200,000 – Php150,000 = Php50,000
Php 50,000 ÷ Php200,000 = 0.25 or 25 percent
Hence, the house depreciated by 25 %.
Example 5:
A company has $15,000 worth of assets, but this is set to devalue by 8% annually for two
years. By how much have the assets depreciated?
Given: % = 8%
N=2
Staring value = $15,000
Solution:
8%
Value = Starting value (1 + 100 )n
8% 2
Value = 15,000 (1 - )
100

Value = $ 12,696.00
Original value –final value = 15,000 – 12,696 = $ 2,304
Therefore, the asset of the company depreciated with an amount of 2,304 dollars.

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