> Economic depreciation takes
> into account new technology, changing demand, ....
Rubbish. Those things can accelerate depreciation, but you paid what you paid when you paid. Peter's math is wrong because it only looks at the current year. I don't know what you guys are trying to prove, but leave depreciation out of it. In both cases -- economic and tax depreciation -- you're trying to come up with an estimate for the lifetime of an asset; you will in most cases be wrong. When you know the truth -- either you wore it out, or you withdrew it from use because it got replaced by something better -- you can then determine what it was actually worth.
Up until then, you're just guessing.
Example: you buy a $5k computer and think it will last for 5 years. You apply straight-line depreciation to it of 20%/year, because hey: no one will swat you for guessing in this way. In the 3rd year, a Quintuple-Hex-a-core-whizbang-III comes out and you have to have it. You toss your 5-year computer into the trash after three years. Ergo: it was actually a 3 year computer, and if you want to know how productive it was, you can divide by 3 now instead of your earlier estimate of 5, which was wildly wrong. 3 years is still a guess, but it's a better guess than 5. Maybe in the 2nd year you really got good at having this thing help you make some big bucks? It's likely to not be linear. *shrug*
Blah, blah, blah: get to the point.
/jordan