Journal Article

Depreciation methods for agricultural tractors and risk modeling: application of the Monte Carlo method

Martins, Leonardo Antero de Araujo, Novaes, Adalberto Brito de, Silva, Márcio Lopes da, Freitas, Luís Carlos de, Silva, Gustavo Freitas Bastos, José, Alcebíades Rebouças São

2026

Overview

This study analyzed the performance of five depreciation methods (straight-line, exponential depreciation method, sum-of-the-years’-digits, inverse sum-of-the-years’-digits, and sinking fund) applied to three models of agricultural tractors over a ten-year horizon. Additionally, a risk analysis was conducted using the Monte Carlo method, considering acquisition cost, residual value, and the asset’s useful life as input variables. The methods revealed different depreciation scenarios over the machinery’s useful life. The exponential depreciation method and sum-of-the-years’-digits methods showed more pronounced depreciation costs in the early years, while the sinking fund and inverse sum-of-the-years’-digits methods yielded higher depreciation values toward the end of the equipment’s useful life. Given the steeper depreciation in the initial phase, the exponential depreciation method and sum-of-the-years’-digits methods more accurately represented the annual losses due to depreciation. The acquisition cost demonstrated a positive and significant correlation with depreciation costs, unlike the residual value and useful life, which showed a negative and weak correlation. The risk analysis was conducted based on the exponential depreciation method depreciation for year 1 and the tractor model B. The analysis showed that, considering a ±10% variation in acquisition cost and residual value of the tractor, and a 10% increase in its useful life, more than 34% of the exponential depreciation values obtained through risk modeling exceeded the value calculated for year 1 (USD 6,816.51), characterizing an economic risk.

• Publisher: Universidade Federal de Santa Maria
• Subject: AGRONOMY / exponential depreciation method / machinery depreciation / straight-line method