Fixed Declining Balance

[tom boone]

The DB formula doesn't yield the required $50,000 salvage
value at the end of 10 years. Instead, it gives $50,161.21.

Cost: $450,000
Lifetime: 10
Salvage: $50,000

Can someone explain what I'm doing wrong?

 

[J.E. McGimpsey]

As explained in XL Help, the rate for the DB function is rounded to
three decimal places. To get exactly the salvage value, use

rate = (1-((salvage/cost)^(1/life)))

and (assuming first and last years have 12 months of depreciation:

E1: =cost * rate
E2: =(cost - SUM(E$1:E1))*rate

copy E2 down to E10.

then cost-SUM(E1:E10) will give exactly the salvage.