I came across a new formula for calculating depreciation during one of my tutoring sessions. We were working on compound interest using the formula A = P(1+r)^t where
A is the amount at the end of the compounding period
P is the principal amount in $
r is the interest rate in decimal
t is the time period in years
When one of the questions was on depreciation, to find the value of a car after being depreciated for 3 years, my student asked if we can use the compound interest formula, but change the addition to a subtraction instead. I thought that it should be possible since depreciation and compounding are pretty much the opposite of each other.
We tried it out, using the formula D = P(1-r)^t where D is the value after depreciation. True enough, the result was exactly what it would be if we did it the long way, calculating year after year.
A very interesting discovery for the both of us on that day. :)