Book depreciation, residual value and sale
Book value against market value at exit.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: book depreciation, residual value and sale.Updated 4 November 2026
Part of project finance and infrastructure models, with the models, labs and guides around it.
What it does
Two values for the same asset. Book value is the accounting: cost depreciated straight line over the useful life from build to a residual value, which for a passenger aircraft lessors commonly set at 25 years and 15% of cost. Market value is what a buyer pays, modelled as a curve that falls at a rate a year and is then shocked by scenario. The sale price, less costs, against book value and any straight-line receivable still carried, is the gain or loss on sale, and for most lessors it is the cash flow that decides the return.
Where it lives
The same schedule in each model that carries it, with the rows to open. Open a model in the browser, go to the sheet, and click the lines.
- Assumptions, rows 11–13: Useful life for book depreciation, Sale costs
- Assumptions, rows 30–34: Aircraft type, Year of build, Price paid, Market value decline, annual…
- Acquisition, rows 6–9: Price paid, Age at close, Useful life remaining at close, Book depreciation, annual
- Residual and Sale, rows 6–11: Book value, opening, Depreciation, Book value sold, Book value, closing…
- Residual and Sale, rows 14–19: Book value, opening, Depreciation, Book value sold, Book value, closing…
- Residual and Sale, rows 22–27: Book value, opening, Depreciation, Book value sold, Book value, closing…
- Residual and Sale, rows 30–37: Depreciation, Book value, closing, Market value of the fleet at the year end, Sale price…
- Reported, rows 32–40: Net book value at 31 December 2022, Additions, Depreciation of flight equipment held for operating leases, Disposals and transfers to held for sale…
- Reported, rows 84–87: Owned aircraft at 31 December, Average age of the owned fleet, weighted by net book value, New aircraft on order at 31 December, Owned aircraft on lease at 31 December 2025
- Derived, rows 18–20: Net gain on sale / book value disposed and moved to held for sale, Net gain on sale / proceeds from sale or disposal, Net spending on the fleet: purchases + prepayments - sale proceeds
- Forecast, rows 10–17: Additions to the fleet, % of opening net book value, base (editorial), Additions to the fleet, % of opening net book value, downside (editorial), Additions to the fleet, % of opening net book value, upside (editorial), Additions to the fleet, % of opening net book value, selected…
- P&L & Cash Flow, rows 6–14: Net book value at the start of the year, Additions, Book value sold or moved to held for sale, Depreciation of flight equipment…
- One Lease, rows 16–19: Depreciation: price less book residual over the depreciable life, Net book value at the year end, Sale at the end: residual value less the idle months’ rent and carrying cost, Gain (loss) on sale against book value
What a reviewer looks for
- A sale at book value, so the residual carries no view.
- Depreciation over a full new life for an aircraft bought mid-life.
- A gain measured without the straight-line receivable still on the balance sheet.
Learn it, then build it
Vocabulary: Depreciation & Amortisation (D&A), Impairment, Loan-to-Value (LTV).