Final answer:
The rusting of a metal building due to rain exposure is an example of physical depreciation, specifically due to corrosion, which is a chemical process where metal deteriorates by oxidation. This depreciation affects business valuation and requires protective measures for asset longevity.
Step-by-step explanation:
The type of depreciation described in the scenario where a company buys a corrugated-metal building to store fertilizer, which then rusts away due to rain, is known as physical depreciation. This occurs when an asset deteriorates in physical condition over time due to factors like weather, which leads to the corrosion of the building's metal parts. Corrosion is a naturally occurring process that involves the deterioration of metals when exposed to elements such as water and oxygen, leading to rust and eventually the degradation of the asset's value.
Rusting is a specific type of corrosion that affects iron and its alloys leading to the formation of iron oxide. The chemical properties and reactions involved in this process result in the weakening of the material, causing it to crumble and reduce in strength over time. The rusting of the building is a potent example of how environmental factors can result in physical depreciation, regardless of the asset's use or the presence of factors such as acidic rain which can accelerate the corrosion process. This form of depreciation can have a significant impact on the business valuation of assets and it is important for companies to consider protective measures to extend the lifespan of their physical assets.