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59/3335–8FE Reference Handbook 10.4 · Engineering Economics · Depreciation
1. Simple Interest2. Single-Payment Compound Amount (F/P)3. Single-Payment Present Worth (P/F)4. Uniform-Series Compound Amount (F/A)5. Sinking-Fund Factor (A/F)6. Capital-Recovery Factor (A/P)7. Uniform-Series Present Worth (P/A)8. Effective Interest Rate9. Arithmetic Gradient Present Worth (P/G)10. Net Present Worth11. Benefit–Cost Ratio12. Straight-Line Depreciation13. Geometric Gradient Present Worth14. Capitalized Cost (Perpetual PW)15. Payback Period16. Break-Even Quantity17. Equivalent Uniform Annual Worth18. Internal Rate of Return vs MARR19. MACRS Depreciation20. Declining-Balance Depreciation21. Inflation and Real Interest22. Expected Value of Alternatives

Handbook formula

MACRS Depreciation

US tax depreciation uses IRS MACRS tables (half-year convention). Book value never takes an extra salvage subtraction — salvage is already implicit in the tabulated rates, which sum to 1.

Depreciable basis (usually first cost)
Tabulated MACRS rate in year t

Step-by-step solved example

5-year MACRS, B=$10,000. Year-1 rate 20%. Find D1 and BV1.

B123456An
Book value stepping down each year by tabulated MACRS rates.

  1. 1. D1

    0.20×10000=$2000.

  2. 2. BV1

    10000−2000=$8000.

Answer: D1=$2000, BV1=$8000

10 practice questions

0/10 correct

1.MACRS 5-year property is actually depreciated over

2.Rates in a MACRS class sum to

3.Salvage in MACRS tax tables is

4.BV after full recovery is

5.D2 with r2=32% and B=10000 is

6.Switch from DB to SL in classical declining balance happens

7.Section 179 / bonus (if asked) is

8.Book (tax) depreciation is a

9.Basis B usually equals

10.Straight-line on (B−S)/n compared with MACRS is