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Replacement Value by Sinking Fund Method Formula

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Replacement Value refers to the cost of acquiring or restoring an asset with an equivalent or similar utility to replace an existing one. Check FAQs

C R = \frac{V - V a}{(\frac{{(1 + i)}^{a} - 1}{{(1 + i)}^{n} - 1})}

C_R - Replacement Value?V - Original Value of Assets at Start of Service?V_a - Asset Value?i - Annual Interest Rate?a - Number of Years in Actual Use?n - Service Life?

Replacement Value by Sinking Fund Method Example

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Here is how the Replacement Value by Sinking Fund Method equation looks like with Values.

Here is how the Replacement Value by Sinking Fund Method equation looks like with Units.

Here is how the Replacement Value by Sinking Fund Method equation looks like.

3.3E+10 = \frac{50000 - 10001}{(\frac{{(1 + 6)}^{3} - 1}{{(1 + 6)}^{10} - 1})}

3.3E+10 = \frac{50000 - 10001}{(\frac{{(1 + 6)}^{3} - 1}{{(1 + 6)}^{10} - 1})}

3.3E+10 = \frac{50000 - 10001}{(\frac{{(1 + 6)}^{3} - 1}{{(1 + 6)}^{10} - 1})}

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Replacement Value by Sinking Fund Method Solution

Follow our step by step solution on how to calculate Replacement Value by Sinking Fund Method?

FIRST Step Consider the formula

C R = \frac{V - V a}{(\frac{{(1 + i)}^{a} - 1}{{(1 + i)}^{n} - 1})}

Next Step Substitute values of Variables

∴

C R = \frac{50000 - 10001}{(\frac{{(1 + 6)}^{3} - 1}{{(1 + 6)}^{10} - 1})}

Next Step Prepare to Evaluate

∴

C R = \frac{50000 - 10001}{(\frac{{(1 + 6)}^{3} - 1}{{(1 + 6)}^{10} - 1})}

Next Step Evaluate

∴

C R = 33037214750.7368

LAST Step Rounding Answer

∴

C R = 3.3E+10

Replacement Value by Sinking Fund Method Formula Elements

Variables

Replacement Value

Replacement Value refers to the cost of acquiring or restoring an asset with an equivalent or similar utility to replace an existing one.

Symbol: C_R

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Replacement Value

Original Value of Assets at Start of Service

Original Value of Assets at Start of Service Life Period refers to the initial cost or acquisition cost of a tangible asset when it is first put into service.

Symbol: V

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Original Value of Assets at Start of Service

Asset Value

Asset Value at the end of 'a' year refers to the estimated monetary worth or value of a tangible asset at the conclusion of a specific period, 'a' year, within its useful life.

Symbol: V_a

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Asset Value

Annual Interest Rate

Annual Interest Rate is the amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets on annual basis.

Symbol: i

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Annual Interest Rate

Number of Years in Actual Use

Number of Years in Actual Use refers to the period of time during which a particular asset has been actively employed or utilized for its intended purpose in a business or operational context.

Symbol: a

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Number of Years in Actual Use

Service Life

Service Life refers to the estimated period during which the asset is expected to provide economic benefits and be used for its intended purpose.

Symbol: n

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Service Life

Other formulas in Depreciation category

Go Book Value of Process Equipment at any Time during Service Life

V a = V - a \cdot d

Go Depletion Cost

D = I \cdot (\frac{U}{P})

Go Annual Depreciation by Straight-Line Method

d = \frac{V - V s}{n}

Go Fixed Percentage Factor using Matheson Formula

f = 1 - {(\frac{V s}{V})}^{\frac{1}{n}}

How to Evaluate Replacement Value by Sinking Fund Method?

Replacement Value by Sinking Fund Method evaluator uses Replacement Value = (Original Value of Assets at Start of Service-Asset Value)/((((1+Annual Interest Rate)^(Number of Years in Actual Use)-1)/((1+Annual Interest Rate)^(Service Life)-1))) to evaluate the Replacement Value, Replacement Value by Sinking Fund Method refers to the estimated monetary amount required to replace or renew a tangible asset at the end of its useful life. Replacement Value is denoted by C_R symbol.

How to evaluate Replacement Value by Sinking Fund Method using this online evaluator? To use this online evaluator for Replacement Value by Sinking Fund Method, enter Original Value of Assets at Start of Service (V), Asset Value (V_a), Annual Interest Rate (i), Number of Years in Actual Use (a) & Service Life (n) and hit the calculate button.

FAQs on Replacement Value by Sinking Fund Method

What is the formula to find Replacement Value by Sinking Fund Method?

The formula of Replacement Value by Sinking Fund Method is expressed as Replacement Value = (Original Value of Assets at Start of Service-Asset Value)/((((1+Annual Interest Rate)^(Number of Years in Actual Use)-1)/((1+Annual Interest Rate)^(Service Life)-1))). Here is an example- 3.3E+10 = (50000-10001)/((((1+6)^(3)-1)/((1+6)^(10)-1))).

How to calculate Replacement Value by Sinking Fund Method?

With Original Value of Assets at Start of Service (V), Asset Value (V_a), Annual Interest Rate (i), Number of Years in Actual Use (a) & Service Life (n) we can find Replacement Value by Sinking Fund Method using the formula - Replacement Value = (Original Value of Assets at Start of Service-Asset Value)/((((1+Annual Interest Rate)^(Number of Years in Actual Use)-1)/((1+Annual Interest Rate)^(Service Life)-1))).

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Replacement Value by Sinking Fund Method Formula

Replacement Value by Sinking Fund Method Example

Replacement Value by Sinking Fund Method Solution

Replacement Value by Sinking Fund Method Formula Elements

Other formulas in Depreciation category

How to Evaluate Replacement Value by Sinking Fund Method?

FAQs on Replacement Value by Sinking Fund Method

Variable Name