ENGINEERING ECONOMY 1.
What are the present worth and the accumulated amount of a 10-year annuity paying at the end of each year, with interest at 15% compounded annually? a. 51,880; 207,030 c. 61,880; 270,030 b. 50,188; 203,037 d. 50,881; 203,037
2.
An electronics engineer wishes to set up a special fund by making uniform semi annual end of period deposits for 20 years deposits for 20 years. The fund is to provide P100,000 at the end of each of the last five years of the 20-year period. If interest is 8% compounded semiannualy, what is the required semiannual deposit to be made? a. 6193.39 c. 1963.93 b. 3916.39 d. 9163.93
3.
Using compound interest of 8%, find the equivalent uniform annual cost for a proposed machine that has a first cost of P100,000 and an estimated salvage value of P20,000 and an estimated economic life of 8 years. Annual maintenance will amount to P2,000 a year and periodic overhaul costing P6,000 each will occur at the end of the second and fourth year. a. 19,813 c. 18,931 b. 18,381 d. 19, 183
4.
A man purchase a house for P425,000. In the first month that he owned the house, he spend P75,000 on repairs and remodelling. Immediately after the house was remodeled, he was offered P545,000 to sell the house. After some consideration, he decided to keep the house and have it rented for P4,500 per month starting two months after the purchase. He collected rent for 15 months and then sold the house for P600,000. If the interest rate was 1.5% per month, how much extra money di he make or lose by not selling the house immediately after it was remodeled? a. 1500 c. 4010 b. 5150 d. 5015
5.
Today, you invest P100,000 into a fund that pays 25% interest compounded annually. Three years later, you borrow P50,000 from a bank at 20% annual interest and invest in the fund. Two years, you withdraw enough money from the fund to repay the bank loan and all interest due on it. Three years from this withdrawal you start taking P20,000 per year out of the fund. After five withdrawals, you withdraw the balance in the fund. How much was withdrawn? a. 1,320,255 c. 1,230,255 b. 1,255,320 d. 1,522,302
6.
On the day his grandson was born, a man deposited a trust company a sufficient amount of money so that the boy could receive five annual payments of P10,000 each for his college tuition fees, starting with his 18th birthday. Interest at the rate of 12% per annum was to be paid on all amount on deposit. There was also a provision that the grandson could elect to withdraw no annual payments and receive a single lump amount on his 25th birthday. The grandson chose this option. How much did the boy receive as the single payment? And how much did the father deposit? a. P89,250, P5,250 c. P51,100, P2,550 b. P10,500, P5,250 d. P98,502, P2,550
7.
A debt of P40,000 whose interest rate is 15% compounded semiannually, is to be discharged by a series of 10 semiannual payments, the first payment to be made 6 months after consummation of the loan. The first 6 payments will be P6,000 each, while the remainind 4 payments will be equal and of such amount that the final payment will liquidate the debt. What is the amount of the last 4 payments? a. P4,554 c. P5,445 b. P4,445 d. P5,454
8.
A man bought an equipment costing P60,000 payable in 12 quarterly payments, each installment payable at the beginning of each period. The rate of interest is 24% compounded quarterly. What is the amount of each payment? a. P7,372 c. P7,723 b. P3,337 d. P3,273
9.
A certain property is being sold and the owner received two bids. The first bidder offered to pay P400,00 each year for 5 years, each payment is to be made at the beginning of each year. The second bidder offered to pay P240,000 first year, P360,000 the second year and P540,000 each year for the next 3 years. all payments be made at the beginning of each year. If money is worth 20% compounded annually, which bid should the owner of the property accept? a. First bid c. Either of the bids b. Second bid d. Neither of the bids
10. A manufacturing firm wishes to give each 80 employees a holiday bonus. How much is needed to invest monthly for a year at 12% nominal interest rate compounded monthly, so that each employee will receive a P2,000 bonus? a. P12,615.80 c. P12,611.80 b. P12,516.80 d. P12,510.80 11. A young engineer borrowed P10,000 at 12% interest and paid P2,000 per annum for the last 4 years. What does he have to pay at the end of the fifth year in order to pay off his loan? a. P6,999.39 c. P6,292.93 b. P6,222.39 d. P6,922.93
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12. A man paid 10% down payment of P200,000 for a house and lot and agreed to pay the balance on monthly instalments for “x” years at an interest rate of 15% compounded monthly. If the monthly instalment was P42,821.87, find the value of x? a. 3 b. 4 b. 5 d. 6 13. You need P4,000 per year for four years to go to college. Your father invested P5,000 in 7% account for your education when you were born. If you withdraw P4,000 at the end of your 17th, 18th, 19th and 20th birthday, how much will be left in the account at the end of the 21st year? a. P1,666.98 c. P1,699.86 b. P1,623.89 d. P1,645.67 14. A man inherited a regular endowment of P100,000.00 every end of 3 months for x years. However, he may choose to get a single lump sum of P3,702,939.80 at the end of 4 years. If the rate of interest was 14% compounded quarterly, what is the value of x? a. 10 c. 11 b. 12 d. 13 15. For having been loyal, trustworthy and efficient, the company has offered a supervisor a yearly gratuity pay of P20,000.00 for 10 years with the first payment to be made one year after his retirement. The supervisor, instead, requested that he be paid a lump sum on the date of his retirement less interact that the company would have earned if the gratuity is to be paid on the yearly basis. If interest is 15%, what is the equivalently lump sum that he could get? a. P100,357.37 c. P100,537.73 b. P100,375.37 d. P100,735.37 16. A company purchased for a cash price of P500,000.00 a machine which is estimated to have a salvage value of P50,000.00 at the end of its 10 years economic life. How much yearly deposit must the company deposit in a sinking fund that will pay 18% interest, compounded yearly, to accumulate the needed fund to purchase the new machine at the end of the 10th year economic life of the machine it purchased if a new machine will cost 75% more by that time? a. P34,859.78 c. P35,890.12 b. P35,074.58 d. P34,074.85 17. What amount of money invested today at 15% interest can provide the following scholarships: P30,000 at the end of each year for 6 years; P40,000 for the next 6 years and P50,000 thereafter? a. P241,277 c. P421,277 b. P277,241 d. 277,421 18. A debt of P10,000 with interest at the rate of 20% compounded semiannually is to be amortized by 5 equal payments at the end of each 6 months, the first payment is to be made after 3 years. Find the semiannual payment. a. P2448.05 c. P4428.50 b. P4842.50 d. P4248.50 19. A loan was to be amortized by a group of four end of year payments forming an ascending arithmetic progression. The initial payment was to be P5000 and the difference between successive payment was to be 400. But the load was renegotiated to provide for the payment equal rather than uniformly varying sum. If the interest rate of the load was 15%, what was the annual payment? a. P5330.15 c. P5053.51 b. P5530.51 d. P5305.51 20. A certain amount was borrowed and was to be repaid in ten instalments at the end of every year thereafter with each payment 1000 more than the preceeding. The first payment is 15,000. If interest if 12% compounded annually. Determine the amount loaned. a. 150,465.25 c. 106,769.60 b. 130,473.40 d. 105,007.43 21. Annual maintenance costs for a machine are 1500 this year and are estimated to increase 10% each year every year. What is the present worth of the maintenance costs for six year if interest rate is 8%. a. 10728.59 c. 8728.79 b. 11287.69 d. 8278.79 22. A broadcasting corporation purchased an equipment for P53,000 and paid P1,500 for freight and delivery charges to the job site. The equipment has a normal life of 10 years with a trade in value of P5000 against the purchase of a new equipment at the end of the life. Determine the annual depreciation cost by straigth line method a. P4,950 c. P9,450 b. P4,590 d. P5,490 23. A broadcasting corporation purchased an equipment for P53,000 and paid P1,500 for freight and delivery charges to the job site. The equipment has a normal life of 10 years with a trade in value of P5000 against the purchase of a new equipment at the end of the life. Determine annual depreciation cost by sinking fund method a. P6883 c. P3866 b. P6386 d. P3668
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24. A firm bought an equipment for P56,000. Other expenses including installation amounted to P4000. The equipment is expected to have a life of 16 years with a salvage value of 10% of the original cost. Determine the book value at the end of 12 years by sinking fund method at 12% interest. a. P34,840 c. P40,381 b. P30,481 d. P43,830 25. A company purchased for a cash price of P500,000.00 a machine which is estimated to have a salvage value of P50,000.00 at the end of its 10 years economic life. How much yearly deposit must the company deposit in a sinking fund that will pay 18% interest, compounded yearly, to accumulate the needed fund to purchase the new machine at the end of the 10th year economic life of the machine it purchased if a new machine will cost 75% more by that time? a. P34,859.78 c. P35,890.12 b. P35,074.58 d. P34,074.85 26. An engineer bought an equipment for P500,000. He spent an additional amount of P30,000 for installation and other expenses. The estimated useful life of the equipment is 10 years. The salvage value is x% of the first cost. Using the straight line method of depreciation, the book value at the end of 5 years will be P291,500. What is the value of x? a. 20% b. 15% c. 10% d. 5% 27. Determine the rate of depreciation, the total depreciation up to the end of the 8th year and the book value at the end of 8 years for an asset that costs P15,000 new and has an estimated scrap value of P2000 at the end of 10 years by declining balance method. a. 18.25%, P2,299, P12,800 c. 18.25%, P2,992, P12,800 b. 18.25%, P2,299, P12,008 d. 18.25%, P2,992, P12,008 28. A plant bought a calciner for P220,000 and used it for 10 years, the life span of the equipment. What is the book value of the calciner after 5 years of use. Assuming a book of 20,000 using double declining balance method. a. 72,090 c. 79,209 b. 70,290 d. 70,902 29. A consortium of international telecommunication companies contracted for the purchase and installation of a fiber optic cable linking two major cities at a total cost of 960 million US dollar. This amount includes freight and installation charges estimated at 10% of the above contract price. If the cable shall be depreciated over a period of 15 years with zero salvage value. What is the depreciation charge during the 8th year using SOYD a. 70.4 million c. 6 million b. 60.0 million d. 7 million 30. A telephone company purchased a microwave radio equipment for P6 million, freight and installation charges amounted to 4% of the purchased price. If the equipment will be depreciated over a period of 10 years with a salvage value of 8%, determine the depreciation cost during the 5th year using SYD. a. P626,269.09 c. P623,209.09 b. P625,129.09 d. P624,069.89 31. ABC Corporation makes it a policy that for any new equipment purchased, the annual depreciation cost should be 20% of the first cost at any time with no salvage value. Determine the length of service life necessary if the depreciation used is the SYD method. a. 7 years c. 8 years b. 9 years d. 10 years
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