Straight-Line — Expense
This formula tells you the actual dollar amount of depreciation you record each year — in other words, how much value the asset loses annually in real money. It builds on the straight-line idea of spreading the loss evenly over the asset's life.
To calculate it, start with the "Cost" (what you paid for the asset). Then subtract the "Salvage" value, which is the amount you expect to sell it for or get back at the end of its life — its leftover worth. This difference is the total amount the asset will lose over its lifetime. Finally, divide that by the "Useful life" (the number of years you'll use it) to get the equal yearly expense.
A larger yearly expense means the asset is either expensive, has little leftover value, or has a short life. A smaller expense means the opposite. A project manager uses this to plan yearly budgets and financial reports, showing a fair, consistent cost for equipment each year of the project.
Think of it like a $80 monthly gym membership you prepaid for the year: even though you paid once, you count $80 of "cost" for each month you use it, spreading the expense evenly instead of all at once.
Suppose your project buys a machine for $10,000 (the cost). You expect to sell it for $2,000 at the end (the salvage value), and you'll use it for 4 years (useful life). The yearly expense is ($10,000 − $2,000) ÷ 4 = $8,000 ÷ 4 = $2,000 per year. So each year you record $2,000 of depreciation, and after 4 years only the $2,000 salvage value remains on the books.
Every PMP formula explained free — plus worked examples and practice in PMP Math, and full timed mocks in the simulator.