It is difficult to ascertain precisely the decline in the value of most assets as they grow
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It is difficult to ascertain precisely the decline in the value of most assets as they grow older. An exception is automobiles. Assume that a new car costs $5000; that its value at the end of one year is $4000, at the end of two years $3000, at the end of three years $2000; and that it loses $250 in value for each of the following eight years. What is the true economic depreciation? What is the present discounted value of this, assuming a 5 percent after-tax interest rate? What will be the depreciation allowances under the current system? What is the present discounted value of these depreciation allowances? (Cars are treated as five-year assets.)
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Economics Of The Public Sector
ISBN: 9780393925227
4th Edition
Authors: Joseph E. Stiglitz, Jay K. Rosengard
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