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In this lesson we will take a look at DDB, which stands for Double Declining Balance, and allows for an accelerated depreciation calculation.
However, it is not recommended, as the residual value is not always reached by the end of the lifespan.
We’ll write Equals, DDB, select the cost, Residual Value, and lifespan, making them absolute as we go, and then select the period to the left.
It also has a fifth optional argument called factor, which allows for an accelerated depreciation.
As this is the Double Declining Balance, the default rate is 2, but it can be changed to any other number.
We’ll leave it be, and copy the formula down.
As we can see, the residual value is not quite reached by the end of the 10 years, which can be detrimental to the company.
It is instead recommended to use the more versatile VDB function.
We’ll also insert a line graph to assess the curvature of the line.
In this lesson we have taken a look at the DDB function, which allows for a manipulated rate of depreciation.