Investment appraisal

Asset depreciation calculator (straight line and diminishing value)

Depreciation spreads the cost of an asset across the years it earns revenue. The method you choose changes reported profit, tax timing and the book value a buyer sees.

Inputs

Result

Straight-line depreciation per year

USD 9,000

Straight-line book value at year 3
USD 53,000
Diminishing value, first year
USD 20,000
Diminishing value book value at year 3
USD 33,750
Difference in book value between methods
USD 19,250
Total depreciable amount
USD 72,000
  • Depreciation policy is an accounting choice; the cash impact only arrives when you replace the asset.

How to use this calculator

  1. 1Enter the asset cost, expected residual value and useful life.
  2. 2Set the diminishing value rate you apply.
  3. 3Choose the year you want the book value for.

Straight line vs diminishing value

Straight line charges (cost − residual) / life every year — simple and predictable. Diminishing value applies a fixed rate to the reducing balance, front-loading the deduction.

Diminishing value improves early-year cash flow through larger deductions, but leaves a lower book value if you sell the asset in year two or three.

Depreciation in a valuation

EBITDA adds depreciation back, but that does not make it free: an asset-heavy business must keep reinvesting. Compare depreciation with actual capital expenditure — if capex consistently exceeds depreciation, reported EBITDA overstates distributable cash.

Buyers often normalise depreciation to a maintenance capex figure before applying a multiple, which is why asset-heavy businesses trade at lower multiples than asset-light ones.

Call this tool from the API

Every calculator on this site is also an endpoint. Get a free key from the developer page and call it from your product, spreadsheet or AI agent.

curl -X POST https://utopiavalue.co/api/v1/tools/depreciation-calculator \
  -H "Authorization: Bearer $UTOPIA_API_KEY" \
  -H "Content-Type: application/json" \
  -d '{"assetCost":80000,"residualValue":8000,"usefulLifeYears":8,"diminishingRatePercent":25,"yearOfInterest":3,"currency":"USD"}'

Frequently asked questions

Which method should I use?

Follow the rules of your jurisdiction and your accountant's advice. Diminishing value suits assets that lose value quickly, such as vehicles and IT.

Is depreciation a cash cost?

No, but the replacement it anticipates is. Treat sustained capex, not depreciation, as the real cash drain.

How does this affect EBITDA?

Depreciation and amortisation are excluded from EBITDA, which is exactly why buyers scrutinise capex separately.