Calculation of book value and depreciation
If you enter values for Book Value, Depreciation Schedule, the book value and depreciation are calculated once optimization is complete (that is, book value and depreciation are not used in the objective function):
- Depreciation and Book Value are calculated based on the values specified in the Book Value field and any capital investments that are made during the model horizon.
- If a Depreciation Schedule (5 year or 10 year straight-line) is selected, it will only be applied to the part of the book value that results from capital investments made at this site or work center.
- If the model periods are not specified as years, then the depreciation and book value are pro-rated by period. For example, if the depreciation in one year is $100,000, then the depreciation in a given period is determined as:
- $100,000 * period length / 365 (or 366 if the year is a leap year)
- Depreciation starts in the first period. For example, if the Book Value is <100000|80000|60000> then the Book Value reported at the end of year 1 is 80000 and total depreciation for the first year is 20000. If the periods are years, this is reported in period 1, not period 2.
- Capital investments are similarly depreciated during the year they were made.
- If a Capital Investment is made (for example, to expand a site), the amount of the Capital Investment is added to the Book Value of the site.
- Once a Capital Investment has been made, the Book Value and Depreciation each are made up of two additive parts. They follow their own schedule: the original book value keeps following the book values specified in the Book Value field, the Capital Investment component follows the depreciation schedule specified in the Depreciation Schedule field.
It is possible that multiple Capital Investments are made during the model horizon, so each of the parts that make up the Book Value and Depreciation are tracked.
- If fewer entries are defined in the Book Value field than the number of years in the model, the Book Value goes to 0 in the year after the last entry in the Book Value field.
- For potential facilities and work centers, the Book Value field is ignored. The Book Value is calculated from any Capital Investments that are made and then depreciated according to the selected Depreciation Schedule from the period of the investment on.
- If a work center or site is closed, then the Book Value goes to 0 in the period it is closed and the Depreciation in this period equals the Book Value of the previous period. The Optimized Status field will be “Closed” in the Site Summary or Work Center Summary Network Optimization output tables.
Last modified: Wednesday May 15, 2024