Page 282 - Analysis, Synthesis and Design of Chemical Processes, Third Edition

to obtain this limiting value.

Example 9.21 illustrates the use of each of the above formulas to calculate the yearly depreciation
allowances.

Example 9.21

The fixed capital investment (excluding the cost of land) of a new project is estimated to be $150.0

million, and the salvage value of the plant is $10.0 million. Assuming a seven-year equipment life,
estimate the yearly depreciation allowances using the following:
a. The straight-line method
b. The sum of the years digits method
c. The double declining balance method
6
6
We have FCI = $150 × 10 , S = $10.0 × 10 , and n = 7 years.
L
Sample calculations for year 2 give the following:
For straight-line depreciation, using Equation (9.22),
6
6
d = ($150 × 10 – $10 × 10 )/7 = $20 × 10 6
2
For SOYD depreciation, using Equation (9.23),
6
6
d = (7 + 1 – 2) ($150 × 10 – $10 × 10 )/28 = $30 × 10 6
2
For double declining balance depreciation, using Equation (9.24),
6
6
d = (2/7) ($150 × 10 – $42.86 × 10 ) = $30.6 × 10 6
2
A summary of all the calculations is given in Table E9.21 and presented graphically in Figure E9.21.

Table E9.21 Calculations and Results for Example 9.21: The Depreciation of Capital Investment for
7
a New Chemical Plant (All Values in $10 )