University of Cebu – Main Campus
College of Engineering
BES 104 – Engineering Economy
Midterm Examination
Instruction: Solve the following problems. Write your solution on a clean short
bond paper. Make sure to box all your final answer for each item. Strictly no
erasures allowed. Summarize your answers. (2 pts. each)
1. What is the present worth of a 4 years annuity paying P4, 000 at the end of each
year, with interest at 10% compounded annually?
2. A large corporation has purchased a jet plane for use its executives. The cost of the
plane is P86million.It has a useful life of 10years.The estimated resale value at the end
of 10 years is 8 million pesos, Using the SOYD, what is the book value of the jet plane
at the end of 4 years?
3. A contractor bought a concrete mixer at P150,000 if paid in cash. The mixer may also
be purchased by installment to be paid within 7 years. If money worth 9%. The
amount of each annual payment, if all payments made at the beginning of each year,
is?
4. A gasoline engine has an annual depreciation of P13,000 for 15 years and salvage
value of P20,000. Using sinking fund depreciation with 15% interest. Determine the
first cost of the engine.
5. A fixture that cost 800 will save P0.07 per item produce. Maintenance will be at 50
annually. 3600 units are produced annually. What is the payback period at 11%?
6. An asset is purchased is ten times its salvage value. Its estimated life is 10 years, after
which it will be sold for P12,000. Find the depreciation for the first year using the
SOYD method.
7. A farmer bought an equipment costing P12, 000. The equipment may be purchased
by installment for 5 years at 8% compounded annually. Find the annual payments if
all payments are made at the beginning of each year.
8. Water pipe has a first cost of P35,000 and has no salvage value after 20 years, using
sinking fund depreciation, determine the annual depreciation for 20% interest.
9. A president borrowed P40,000 and promised to pay amount annually for 20 years at
the beginning of each period with interest rate of 17% compounded semi-annually.
Find the annual amount.
10. ABC corporation makes it policy that for any new equipment purchased the length
of service must be nine years. Find the ratio between annual depreciation cost and
first cost, if the salvage value is zero. Using SOYD method
11. The maintenance cost of a machine this year is expected to be P500. The cost will
increase P150 each year for the subsequent 4 years. The interest is 8% compounded
annually. What is the approximate worth of maintenance for the machine over the
full 5 years?
12. An asset is purchased for P350,000. The salvage value in 18years is P65,000/ what
are the depreciation in the first three years using straight line method?
13. A car needs P5,000 quarterly for its maintenance during its perpetual life. If the
effective interest is 28%, find the present amount of maintenance.
14. ABC corporation makes it a policy that for any new equipment purchased, the
annual depreciation cost should not exceed 30% of the first cost at any time with no
salvage value. Determine the length of service life necessary if the depreciation used
is the SOYD method
15. How much money must you invest today in order to withdraw 2000/year for 11
years if the interest rate 10%.