Find Book Value Using MACRS Depreciation | FE Review Series Engineering Economics

In today’s FE Exam Review Series I’ll go over how to find the book value at year 2, which is an FE exam question.

This step-by-step solution shows how to find the book value of a car at year 2 using the MACRS depreciation method. We first review the concept of MACRS and how it is used to depreciation assets. We also grab the equations from the reference handbook 10-2 to solve for the depreciation using MACRS and the book value at year 2. When finding the depreciation, we can either use the straight line method or MACRS, and in our FE question, it specified MACRS. To find the depreciation using MACRS, we use the table on the reference handbook on page 232. This table provides the MACRS factor, which depends on the recovery period and the year of depreciation. Once we grabbed the factors from the table, then we plugged in the numbers in the depreciation equation and then we used that value to solve for the book value at year 2.

❗If you’re preparing for your FE exam, make sure to go over the book value and depreciation problems; they’re common topic on the FE Exam. Once you’ve mastered and gathered this concept, you will be able to apply it and recreate the step-by-step solution for any problem.

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TIMESTAMPS

00:00 Intro
00:35 FE Question - Finding the book value at year 2
00:58 Reference handbook 10-2 and FE Cheat Sheet
02:32 Pause and Solve
02:35 Solution
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