How does equipment depreciation impact cost estimates?

Equipment depreciation significantly impacts cost estimates as it reflects the reduction in value of the equipment over time, influencing both the upfront and ongoing costs associated with its use. As equipment depreciates, its book value decreases, which can lead to higher overhead costs and may also affect rental rates if the equipment is sourced from outside rentals. Additionally, understanding depreciation helps project managers and estimators account for the total cost of ownership, allowing them to budget appropriately for equipment maintenance, replacement, and financing costs. By considering depreciation, estimators can present a more accurate financial picture of what a project will entail in terms of equipment expenditure, ensuring that bids are competitive while still covering necessary costs.