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# Two years of depreciation at different rates each year

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1. Hi there .

I am stuck on part 'e' of the attached.

I can work out that the year one value is £6500 x 0.65 = £4225.
Also, I can see year two is £4225 x 0.85 = £3591.25

I just don't get why we can just use 0.65 x 0.85 to get 0.5525

I can see see that using 0.5525 x £6500 works but could someone explain why we multiply the two depreciations together please?

Thanks
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2. Well imagine this
at the end of the first year the value is:

Then for the second year it is

Therefore we are really multiplying 6500 like this for the second year, as

The rates therefore multiply to give you the value. This principle can be used even when rates differ from year to year.
3. (Original post by Cryptokyo)
Well imagine this
at the end of the first year the value is:

Then for the second year it is

Therefore we are really multiplying 6500 like this for the second year, as

The rates therefore multiply to give you the value. This principle can be used even when rates differ from year to year.
That makes sense thanks.

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