Concepts
1. For a fixed amount, F that is received at the end of year n the A equivalent
increases as the interest rate increases. TRUE
2. CFD are analogous for FBD for mechanic problems. FALSE
3. Break-even point is the point where revenue equals the total of all expenses
TRUE
4. A future worth(computed at the MARR) greater than zero for a project
guarantees that interest in excess of the MARR has been realized by the
project TRUE
5. Simple interest ignores the time value of money principle FALSE
6. the book value of a depreciable asset is that amount which has been charged
off as a depreciation expense FALSE
7. Material cost is considered from var cost. TRUE
8. Cost concepts such as variable, fixed, mixed, direct and indirect apply only
to manufacturers not to service FALSE
9. Cash flow include depreciation FALSE (dep has no effect in cash flow)
10.An annuity where first payment is made several periods after beginning –
DEFERRED
11.Series of equal payment ANNUITY
12.Mutually Exclusive TRUE
13.An annuity made at the beginning of each period ANNUITY DUE
14.IRR method is also called as Investors Method
15.The amount of money to be paid for the use borrow capital INTEREST
16.In a mutually exclusive TRUE
17.Interest that is earned on prior COMPOUND INTEREST
18.Series of payment increase or decrease GRADIENT
19.Worth of property on acc records BOOK VALUE
20. Study of economic problems ENGINERRING ECO
21.Interest is based on the original amount of loan SIMPLE INTEREST
(WITH PICTURE)
1. Fixed expenses do not change in total when there is modest change in sales
TRUE
7. A value-added activity is one that enhances the perceived value of the product or
service to the customer TRUE
8. **Interest is money paid for the use of equity capital FALSE – CHECK ON
LECTURES
10. $1791, 10 years from now is equivalent to $900 if the interest rate equals 8%
per year. FALSE
12. Break-even analysis is useful for companies that sell products, but is not useful
for companies that provide services. FALSE
16. It is the series of equal payments at equal interval of time. ANNUITY
17. It calculates the number of years required for cash inflows to just equal cash
outflows. PAYBACK PERIOD METHOD
18. Money paid for the use of borrowed capital INTEREST
19. The decrease in the value of physical property due to the passage of time.
DEPRECIATION
20. The process of determining whether an engineering project is to be undertaken
or modified with the objective of obtaining the best utilization of capital resources
taken into account some pertinent facts. ENGINEERING ECONOMY
21. Interest that is based on the original amount of the loan. SIMPLE INTEREST
Problem Solving
1. The officers of the International Leather Company is considering building a plant in
Manila costing ₱2,250,000. At the end of 12 yrs, the plant can be sold for ₱500,000. It
is estimated that sales will be ₱1,000,000/yr and that the labor would cost annually
₱100,000 and overhead would be ₱55,000. Taxes and insurances would be 3% of the
first cost. If MARR is at least 20%.,
a. What is the rate of return (ROR)? 32.6
AI = 1,000,000
AC = Labor cost + overhead + taxes and insurance
AC = 100,000+55,000+(0.03x2,250,000) = 222,500
Depreciation = (FC-SV) / { [(1+i)^n-1] / i }
Depreciation = 44,213.68858
FC = 2,250,000
SV = 500,000
n = 12
i = 20% = 0.20
Capital Invested = 2,250,000
Computed:
ROR = [AI - (AC+D)] / Capital
ROR = [1,000,000 - (222,500+44,213.68858/] / 2,250,000 = 32.59%
ROR > MARR ; FEASIBLE
32.59% > 20%
b. Compute the project’s IRR by Present Worth using 15% and 35%.
a. 32.3 b. 34.5 c. 33.4 d. 35.6
Computed:
@i= 20% ; NPV= 1,257,569.331917
@i= 15% ; NPV= 2,057,984.84662578
@i= 35% ; NPV= -75,548.26698
3. An engineering project analyst is contemplating a 3 year project which require an
initial investment for equipment of $85,000. It is anticipated that, if no inflation, annual
revenues from the project will be $60,000 and annual cash expenses will be $25,000.
Market value is $45,000 at the end of 3 years. MARR 10%,
Payback period? 1.14 years
FC= 85,000
AI= 60,000
AC= 25,000
SV= 45,000
i= 10%
n=3
PP = (FC - SV) / (AI - AC) = 1.142857
1.14 < 3 ; FEASIBLE
4. An engineering project analyst is contemplating a 3 year project which require an
initial investment for equipment of $85,000. It is anticipated that, if no inflation, annual
revenues from the project will be $60,000 and annual cash expenses will be $25,000.
Market value is $45,000 at the end of 3 years. MARR 10%
What is the NPV? 35,849
5. An engineering project analyst is contemplating a 3 year project which require an
initial investment for equipment of $85,000. It is anticipated that, if no inflation, annual
revenues from the project will be $60,000 and annual cash expenses will be $25,000.
Market value is $45,000 at the end of 3 years. MARR 10%
Compute the IRR by Present Worth using 5% and 30%. 29%
i = 5% ; NPV= 49,186.372962
i= 30% ; NPV= -953.573054
IRR = 0.2952 ; FEASIBLE
6.
MARR
201%
B
A
24,00
0
30,
000
Power
1,300
1,3
60
Labor
11,60
0
9,3
20
2,800
1,9
00
3%
3%
5
5
First
Cost
Mainte
n
Ance
Taxes
&
Insuran
c
E
Life,
Years
Compute for IRR 44%
CO4:
Increment Value:
FC= 24,000-30,000 = 6,000
AE(A)= 1300+11600+2800+(0.03x24000) = 16,420 ; w/o 0.03 = 15,700
AE(B)= 1360+9320+1900+(0.03x30000) = 13,480 ; w/o 0.03 = 12,580
AE(A-B)= 2,940 ; 3,120
n = 5years
(INCOMPLETE QUESTION) NO MARR
7. Mr Jones plans a deposit of $500 at the end of each month for 10 years at
12% interest compounded monthly. What will be the amount in 2 years?
13,486.7324 = 13,500
8. Today, a man borrowed money to be paid in 10 equal payments for 10 quarters. If
the interest rate is 10% compounded monthly and the quarterly payment is ₱2000.
How much did he borrow? 17,504.13
9. A man may take $50,000 cash on 10 equal monthly payments on a life insurance
policy, where the first payment is to be made immediately. What is the monthly
payment if money is
worth 3% compounded monthly? 5069.07
P= 50,000
nm= (10)(12) = 120
r= 3%
i= 0.03/12 = 0.0025
iba sagot ko sa sagot ni bryan
10. Clark and Leah owes 25,000 due at the end of one year and another 25,000 due at
the end of 5 years. They agree to pay 35,000 on the second year and the remaining
balance a year after their first payment. How much must they pay for their second
payment if money is worth 5% compound semi annually. 13,472
11. What uniform annual amount should be deposited each year to accumulate
100,000 at the end of the 5th annual deposit if money earns 10%.interest? 16,379.75
12. If you want to withdraw $20,000 at the end of 2 years and $55,000 at the end of 4
years, how much should you deposit now into an account that pays 12% compounded
semi-annually?
50,349.55 = 50,350
13. I am setting up a fund for my son to go to college. I figure that he will need $50,000
by the time he is old enough to go to college. I found an account that pays 5.75%
compounded monthly. How much will my monthly payment be to get my son set up for
college in 17 years? $145.06
How much interest will the account accrue? 20,407.76
14. If $25,000 is deposited now into a savings account that earns 6% per year, what
uniform
annual amount could be withdrawn at the end of each year for 10 years so that nothing
would be left in the account after the 10th withdrawal? $3396.6989
Used formula for annuity due; my answer is 3,204.4298 ; but not sure
15. An independently owned moving company wants to have enough money to
purchase a new tractor trailer in 4 years. If the unit will cost 250,000, how much should
the company set aside each year if the account earns 10% per year? $53,867.80 =
53868
16. A man brought an equipment costing 60,000 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? $7176.96
17. If 10,000 is deposited each year for 9 years, how much annuity from the bank every
year for 8 years starting 1 year after the 9th deposit is made. Cost of money is 14%.
34,675
18. You deposit $4,000 today, $5,000 one year from now, and $7,000 three years from
now. How much money will you have at the end of year three if there are different
annual compound interest rates per period of 4%, 8%, and 12% respectively?
$17,331.456
#4- cash flow diagram notes
F3= 13,466.8367 (not sure)
19. What is the accumulated amount of the five year annuity paying P6,000 at the
end of each year, with interest at 15% compounded annually? F=$40454.29
Ordinary annuity formula
20. Determine the present worth of an annuity consisting of 6 payments of $12,000
each, the payment are made at the beginning of each year. Money is worth 15%
compounded monthly.
a. $69,814 <- sagot ko (I used annuity due formula)
$44,123.29<- sagot ni bryan
21. The officers of the International Leather Company is considering building a plant in
Manila costing ₱2,250,000. At the end of 12 yrs, the plant can be sold for ₱500,000. It is
estimated that sales will be ₱1,000,000/yr and that the labor would cost annually
₱100,000 and overhead would be ₱55,000. Taxes and insurances would be 3% of the
first cost. If MARR is at least 20%.,
What is the net present value (NPV) of the project?
1,257,569
22. If money is worth 16%, m = 2 find the single payment which would replace the
following obligations at the end of 3 years, if $25,000 due at the end of 2 years and
P15,000 due at the end of 2 ½ years. 45,360
23. A $20,000 loan was originally made at 8% simple interest for 4 years. At the end of
this period the loan was extended for 3 years with the new interest rate at 10%
compounded quarterly. How much should the borrower pay at the end of 7 years?
35,505
24. What is the present worth of a 3 years annuity paying P3,000 at the end of each
year, with interest at 8% compounded annually? $7731.29
25. If you borrow $9,000 and agree to repay the loan in six equal semi-annual payments
at an interest rate of 10% annually, what will the payment be? 1773.16
Iba sagot ko- recompute again
26. A person deposit $6000 per year into a retirement account which pays interest at 8%
per year. The amount of money in the account at the end of 30 years is 679,699.27
(ordinary annuity formula)
27. Money borrowed today is to be paid in 6 equal payments at the end of 6 quarters. If
the interest is 12% compounded quarterly, how much was initially borrowed if a
quarterly payment is P2,000? 10,834
28. If A=P5,000, G=P400, and n=6, then i=15%; P A = ? 10,275
29. Money is to be put into account in four equal deposits at the end of 4 quarters. If the
interest is 4% compounded quarterly, how much will be accumulated if the quarterly
deposit is 4,000. 16,242
30. An engineering project analyst is contemplating a 3 year project which will require
an initial investment for equipment of $85,000. It is anticipated that, if there is no
inflation, annual revenues from the project will be $60,000 and annual cash expenses
will be $25,000. It is estimated that the left-over equipment will have a market value of
$45,000 at the end of three years. Using an MARR of 10%,
What is the rate of return of the... 27%
31. A debt of 5000, which was due 5 years from now, instead of going to be repaid by
three payments: 2000 now, $1000 in 2 years time and the third payment after 4 years.
What will be the final payment if the assumed interest rate is 6% per annum
compounding half-yearly? 1054
32. You are preparing to buy a vacation house five years from now. The home will cost
$100,000 at that time. You plan on saving three deposits at an interest rate of 10%: 
Deposit 1: Deposit $12,000 today  Deposit 2: Deposit $15,000 two years from now. 
Deposit 3: Deposit $x three years from now.
How much do you need to invest in year three to ensure that you have the necessary
funds to buy the vacation home at the end of year five? (Ans. $50,173)
33. A project is expected to generate a cash flow of 8000 in year 1, 2000 in year 2 and
5000 in year 3 (correct based on online quiz score)
34. Determine the capitalized cost of a research laboratory which requires 5,000,000 for
original construction; P100,000 at the end of every year for the first 6 years and then
P120,000 ech year thereafter for operating expenses, and P500,000 every 5 years for
replacement of equipment with interest 12% per year 6,573,646
35. You want to start saving for your 10-year old son’s college education. If you were
guaranteed 6% interest compounded quarterly, how much would you have to save per
month to amount to P12,000 by the time he is 18? 98
36. A person buys a piece of lot for 100,000 downpayment and 10 deferred semi-annual
payments 8,000 each, starting 3 years from now. What is the present value of the
investment if the rate of interest is 12% compounded semi-annually. 143,999
37. I will invest 500 per quarter for my retirement at 7.3% compounding quarterly for 32
years. I have a choice of making that payment of 500 at the beginning of the quarter.
How much money will I have at the end of 32 years. 254,543.36
38. A businessman borrowed 10,000 with interest at the rate of 5% payable annually.
The debt will be paid, principal and interest included by equa installments at the end of
each year for 3 years. Compute the annual payment 3672
39. A man paid 10% down payment of P200,000 for a house and lot and agreed to pay
the 90% balance on monthly installments for 60 months at an interest rate of 15%
compounded monthly. Compute the amount of the monthly payment 42,822
40. ordinary interest amount due if P3,000,000 was invested at 12.5% for the period
from May 20 to Aug 8 84,375
41. You are considering investing in a 5-yr CD (certificate of deposit) with an annual
yield of 6.5% and monthly compounding. If you invest $5,000, your effective interest
earned is most nearly 6.7%
42. What is the accumulated amount after 5 years of P2,000 invested at the rate of 10%
per year compounded bi-monthly? 3,294
43. A student plan to deposit P1,500 in the bank now and another P3,000 for the next
2 years. If he plans to withdraw P5,000 3 years after his last deposit for the purpose of
buying shoes, what will be the amount of money left in the bank after one year of his
withdrawal? Effective annual interest rate is 10%. 1550
44. A man purchased on monthly installment a P100,000 worth of land. The interest rate
is 12% nominal and payable in 20 years. What is the monthly amortization? 1,101.08
45. Find the exact leap year interest amount due if 3000 was invested at 12.5% for the
period from May 20 to Aug 8 82,192
46. Find the ordinary interest amount due if 3,000,000 was invested at 12.5% for the
period from May 20 to Aug 8 84,375
46. If you borrow $9,000 and agree to repay the loan in six equal semi-annual payments
at an interest rate of 10% annually, what will the payment be? 1653.75
47.
Centrifuge, -87,042
48.
1850
49. A bridge with initial cost of P50,000,000 has a life of 20 years. The bridge must be
partially re-built at the end of each 20 years at a cost of P10,000,000. It will have an
annual operating cost of P1,000,000 for the first 10 years and P500,000 thereafter. At
6% annual interest; Determine Case II Capitalized Cost 54,530,759.5
50. Recent technology has made possible a computerized vending machine that can
grind coffee beans and brew fresh coffee on demand. The computer also makes
possible such complicated functions as tracking the age of an item and then moving the
oldest stock to the front of the line, thus cutting down on spoilage. Easy Snack Inc. has
estimated the cash flows in thousands of dollars over the products's six-year useful life,
including the initial investment, as follows:
Compute for the ERR if MARR is 18%. 33%
Using 20% and 65% annual interest rates, what is the IRR for this investment? 61.7%
51. In 1739, Gregory Smith sold the Kohinoor diamond to Queen Victoria for 34. If he
saved just 5 from the proceeds in a bank account that paid a 6% annual interest, how
much would the descendants have in 2020? 414,115,218.79
52. Telephone switchboard 100 pair cable can be made up with either enameled wire or
tinned wire. there will be 400 soldered connections. the cost for soldering a connection
on the enameled wire will be P1.65, on the tinned wire it will be P1.15. a 100-pair cable
made up with enabled wire cost P0.55 per lineal foot and those made up of tinned wire
cost P0.75 per lineal foot.
Determine the length of cable run in ft. so that the cost of each installation would be the
same. 515 ft
Determine the length of cable at which each alternative is more economical. 1000
53. A manufacturing firm maintains one product assembly line to produce signal
generators. weekly demand for generators is 35 units. the line operates for 7 hours per
day. 5 days per week. what is the maximum production time per unit in hours required of
the line to meet demand. 1 hour per unit
54. a man expects to receive P25,000 in 8 years. how much is that money worth now
considering interest at 8% compounded quarterly? 13265.83 = 13266 - compound I.
55. kathy buys a television set from a merchant who asks P1,250 at the end of 60 days
(cash in 60 days). kathy wishes to pay immediately and the merchant offers to compute
the cash price on the assumption that money is worth 8% simple interest. what is the
cash price today? 1233.23
56. a proposed project is estimated to have the following cash flow, at 7% MARR:
what is the future worth of the project (round off answer to whole number) 3885
57. the officers of the international leather company is considering building a plant in
metro manila costing P2,250,000. at the end of 12 years, the plant can be sold for
P500,000. it is estimated that sales will be P1,000,000 per year and that labor would
cost annually P100,000 and overhead would be P55,000. taxes and insurance would be
3% of the first cost. if MARR ia at least 20%.
what is the rate of return of the metro manila plant project? 34.5%
Compute the project’s IRR by PW using 15% and 35% rates? 34.29% >>> 34.5%
What is the ERR of the project? 16%
58. Mr. Perez loaned P200,000 from a bank to expand his business. a quarterly interest
of P7,700 must be paid every 3 months and the entire principal of P200,000 will be
repaid in 4 years. what is the nominal annual interest paid by Mr. Perez? 14.7%
59. determine the present worth of an annuity consisting of 6 payments of $12,000
each, the payment are made at the beginning of each year. Money is worth 15%
compounded monthly. 69,814
60. a person deposit $6000 per year into a retirement account which pays interest at 8%
per year. the amount of money in the account at the end of 30 years is. 679699
61. if you want to withdraw $20,000 at the end of two years and $55,000 at the end of
four years, how much should you deposit now into an account that pays 12%
compounded semi-annually? 50350
62. how much money must you invest today in order to withdraw P2000 annually for 10
years if the interest rate is 9%? 12835.32
63. a loan of P5000 is made for a period of 15 months at a simple interest rate of 15%.
what future amount is due at the end of the loan period? 5937.50
64. alternative methods I and II are proposed for a plant operation. Determine which
alternative is economical if MARR is 20%.
using the future equivalent worth method, the better alternative is Method II amounting
to 52442
65. what uniform annual amount should be deposited each year in order to accumulate
P100,000 at the end of the 5th annual deposit if money earns 10% interest? 16379.75 =
16380
66. if you borrowed money from your friend with simple interest of 12%, find the present
worth of P20,000, which is due at the end of nine months. 18348.60
67. how much money must be invested on Jan. 1, 1998 in order to accumulate P2,000
on Jan. 1, 2003. Money is worth 6%. 1494.52
68. what is the accumulated amount after 5 years of P2,000 invested at the rate of 10%
per year compounded bi-monthly? 3284
69. A fully secured loan of P30,000 was to be amortized by 10 equal semi-annual
payments, the first to be made 6 months after the loan finalization. After the 6th
payment was made by the debtor was in a position to settle the entire debt balance by a
single payment on that date. If the interest on the loan is 12% compounded semiannually, what be the amount of the single payment? 15,437 14,124 13,488 16,935
70. The XYZ company is contemplating the purchase of a new milling machines. The
purchase price of the new machine is P60,000 and its annual operating cost is
P2,675.40. The machine has a life of 7 years, and it is expected to generate P15,000
revenues in each year of its life. Should the company acquire a new milling machine?
The company expects to earn not less than 20%.
A. The payback period is: 4.87 years
B. The Net present value (NPV) is: -15,574.84 or -15,575
71. if money is worth 16%, m=2 find the single payment which would replace the
following obligations at the end of 3 years, if $25,000 due at the end of 2 years and
P15,000 due at the end of 2 ½ years. $45360
72. the amount P50,000 was deposited in the bank earning an interest of 7.5% per
annum. determine the total amount at the end of 5 years. if the principal and interest
were not withdrawn during the period? 71781.47
73. Consider the accompanying cash flow series at varying interest rates. what is the
equivalent present worth of the class flow series? P = 4,745
74. you invested $100,000 in a project and received $40,000 at n = 1. $40,000 at n = 2,
and $30,000 at n = 3 years. you need to terminate the project at the end of year 3. your
interest is 10%; what is the project balance at the time of termination? loss of 10700
75. a nominal interest of 3% compounded continuously is given on the account. what is
the accumulated amount of P10,000 after 10 years? 13,499
76. If A = P5,000, G= P400, and n = 6, then i = 15%; Pa = ?
A company must relocate one of its factories in 3 years. Equipment for the loading dock
is being considered for purchase. The original cost is P20,000 the salvage value of the
equipment after three years is P8,000. The company’s rate of return (i) on money is
10%. Determine the capital recovery rate per year. 5,625
XYZ Corporation manufactures book cases that it sells for P65 each. It costs them
P35,000 per year to operate its plant. This sum includes rent, depreciation charges on
equipment and salary payments. If the cost to produce one bookcase is P50, how many
cases must be sold each year for XYZ to avoid taking a loss? 2334 units
77. Maria deposits $2,000 in a savings account that pays interest at an annual
compound rate of 3%. Two years after the deposit, the interest rate increases to 4%
compounded semi-annually. A second deposit of 3,000 is made immediately after the
interest rate changes to 4%. How much will be in the fund 7 years after the second
deposit? (round your answer to whole numbeR) 6172
79. A fully secured loan of P30,000 was to be amortized by 10 equal semi-annual
payments, the first payment to be made 6 months after the loan finalization. After the 6
th
payment was made the debtor was in a position to settle the entire debt balance by a
single payment on that date. If the interest on the loan is 12% compounded semiannually, what be the amount of the single payment?
80. You are considering a new punch press machine. This machine will have an estimated service life of
10 years. The expected salvage value at the end of service life will be 10% of the purchase cost. Its
annual operating cash flows are estimated to be $60,000. If you can purchase the machine at $308,758
and MARR is set at 10%, what is the expected rate of return (ROR) on this investment? 15%
81.
You loan from a loan firm an amount of P100,000 with a rate of simple interest of
20%, but the interest was deducted from the loan at the time the money was borrowed.
If at the end of one year, you have to pay the full amount of P100,000, what is the actual
rate of interest? 25%
82. An item is purchased for P100,000. Annual cost is P18,000. Using an interest rate of
8%, what is the capitalized cost of perpetual service? 325,000
83. long will it take money to double if invested at 5% compounded-annually? 14 years
84. A debt at P10,000 with 10% interest compounded semi-annually is to be amortized
by semi-annual payments over the next 5 years. The first due is 6 months. Determine
the semi-annual payments 1,295
85. A newly-built business property, containing a space for a store and two offices, can
be purchased for $1,200,000. A prospective buyer estimates that during the next 10
years he can obtain annual rental $458,460 from the property, and the annual out-ofpocket expenditure will not exceed $60,000. He believes that he should be able to
dispose of the property at the end of 10 years at not less than $ 700,000. Annual taxes
and insurance will total 2.5.% of the first cost. Assume he has efficient capital to
purchase the property, and that the minimum attractive return (MARR) he is obtaining
from his capital is 20%. How much is the excess of the cash flow using the Annual
Worth Method? Round off answer to whole number.
inflow = 458460 x 10 = 4,584,600
outflow = 60,000 + 700,000 + (1,200,000 * 2.5%) = 790,000
excess = inflow - outflow = 3,794,600
86. The plan was to leave $5,000 on deposit in a savings account for 15 years at 6.5%
interest compounded annually. It became necessary to withdraw $1,500 at the end of
the 5th year. How much will be on deposit at the end of the 15-year period? (round to
whole number) $10,043
87. Find the net present worth of the following cash flow series at an interest rate of 8%
Ans: 4394.95
88. An industrial engineer wishes to accumulate a total of P10,000 in a savings account
at the end of 10 years. If the bank only pays only 4% compounded quarterly, what
should be the initial deposit? P6,716.53
89. An investment option is available with continuous compounding at 5% interest. If
you invest $8000 now, how much interest income will you earn if you cash out 3.5
years. 1,530
90. If P5,000 shall accumulate for 10 years at 8% compounded quarterly. Find the
compounded interest at the end of 10 years. P6,040
91. What is the corresponding effective interest rate of 18% compounded semiquarterly? 19.48%
92. A loan of $10,000 is made today at an interest rate of 15% and the first payment of
$3,000 is made 4 years later. The amount that is still due on the loan after the first
payment is most nearly. $14,500
93. A bridge with initial cost of P50,000,000 has a life of 20 years. The bridge must be
partially re-built at the end of each 20 years at a cost of P10,000,000. It will have an
annual operating cost of P1,000,000 for the first 10 years and P500,000 thereafter. At
6% annual interest; Determine Case I Capitalized Cost 59,658,254
94. A proposed project is estimated to have the following cash flow, at 7% MARR:
ANSWER: 745.83
I pray that I would pass this exam and go on to new things with you. Thank you for your peace
and your love in my life. Thank you for your kindness and care for me. Amen.
https://www.academia.edu/26967203/Engineering-Economy - for concepts din
A P4,000 is borrowed for 75 days at 16% per annum simple interest. How much will be due at
the end of 75 days?
P4,133.33
P5,213.33
P4,544.35
P5,102.44
If you borrow $9,000 and agree to repay the loan in six equal semi-annual payments at an
interest rate of 10% annually, what will the payment be?
1773.16
What is the present worth of a 3 years annuity paying P3,000 at the end of each year, with
interest at 8% compounded annually?
7731.29
If you borrowed money from your friend with simple interest of 12%, find the present worth of
P20,000, which is due at the end of nine months.
P18,405.80
P28,580.58
P19,410.84
P18,348.60 (exact: 18,348.62)
A newly-built business property, containing a space for a store and two offices, can be
purchased for $1,200,000. A prospective buyer estimates that during the next 10 years he can
obtain annual rentals of at least $458,460 from the property, and the annual out-of-pocket
expenditure will not exceed $60,000. He believes that he should be able to dispose of the
property at the end of 10 years at not less than $700,000. Annual taxes and insurance will total
2.5% of the first cost. Assume he has sufficient capital to purchase the property, and that the
minimum attractive return (MARR) he is obtaining from his capital is 20%.
How much is the excess of the cash flow using the Annual Worth Method? Round off answer to
whole number.
3794600
What is the accumulated amount of the five year annuity paying P6,000 at the end of each year,
with interest at 15% compounded annually?
P40,454.29
The plan was to leave $5,000 on deposit in a savings account for 15 years at 6.5% interest
compounded annually. It became necessary to withdraw $1,500 at the end of the 5th year. How
much will be on deposit at the end of the 15-year period? (Round off answer to whole number)
10,043.50
Determine the present worth of an annuity consisting of 6 payments of $12,000 each, the
payment are made at the beginning of each year. Money is worth 15% compounded monthly.
$52,226
$61,752
$69,814.02
$43,635
Mr. Jones plans a deposit of P500 at the end of each month for 10 years at 12% interest
compounded monthly. What will be the amount in two years?
13,500 (exact: 13,486.73)
An independently owned moving company wants to have enough money to purchase a
new tractor-trailer in 4 years. If the unit will cost $250,000, how much should the
company set aside each year if the account earns 10% per year?
53867.80
Mr. Perez loaned P200,000 from a bank to expand his business. A quarterly interest of P7,700
must be paid every 3 months and the entire principal of P200,000 will be repaid in 4 years. What
is the nominal annual interest paid by Mr. Perez?
16%
15.4%
13.5%
You deposit $4,000 today, $5,000 one year from now, and $7,000 three years from now. How
much money will you have at the end of year three if there are different annual compound
interest rates per period of 4%, 8%, and 12% respectively?
If you want to withdraw $20,000 at the end of two years and $55,000 at the end of four years,
how much should you deposit now into an account that pays 12% compounded semi-annually?
50350 (exact: 50,349.55)
Today, a businessman borrowed money to be paid in 10 equal payments for 10 quarters.
If the interest rate is 10% compounded monthly and the quarterly payment is P2,000 how
much did he borrow?
17,504.13
I am setting up a fund for my son to go to college. I figure that he will need $50,000 by the time
he is old enough to go to college. I found an account that pays 5.75% compounded monthly.
How much will my monthly payment be to get my son set up for college in 17 years?
18856.50
What is the present worth of a 3 year annuity paying P3000 at the end of each year, with
interest at 8% compounded annually?
P7,731.29
What is the future worth of the project? (Round off answer to whole number)
1711.22
3885
What uniform annual amount should be deposited each year in order to accumulate P100,000
at the end of the 5th annual deposit if money earns 10% interest?
16,379.75
A person deposit $6000 per year into a retirement account which pays interest at 8% per year.
The amount of money in the account at the end of 30 years is
679,699.27
A new boiler was installed by a textile plant at a total cost of P300,000.00 and projected to have
a useful life of 15 years. At the end of its useful life, it is estimated to have a salvage value of
P30,000.00. Determine its capitalized cost if interest is 18% compounded annually.
P322,406.00
P 324, 604.17
P432,564.12
P561,234.16
Ben deposits $5,000 now into an account that earns 7.5% interest compounded quarterly. He
then deposits $1,000 at the end of the 1st year and 2,000 on the 2nd year. How much will the
account contain 10 years after the initial deposit? (Round off answer to whole number)
14006
16088 (computed)
If $25,000 is deposited now into a savings account that earns 6% per year, what uniform annual
amount could be withdrawn at the end of each year for 10 years so that nothing would be left in
the account after the 10th withdrawal?
3725.74
A newly-built business property, containing a space for a store and two offices, can be
purchased for $1,200,000. A prospective buyer estimates that during the next 10 years he
can obtain annual rentals of at least $458,460 from the property, and the annual out-ofpocket expenditure will not exceed $60,000. He believes that he should be able to
dispose of the property at the end of 10 years at not less than $700,000. Annual taxes and
insurance will total 2.5% of the first cost. Assume he has sufficient capital to purchase
the property, and that the minimum attractive return (MARR) he is obtaining from his
capital is 20%.
What is the Rate of Return of the Investment (in %)?
29.08
745.83
A loan of $3,000 was made at 9% simple interest. How long would it take in years for the
amount of the loan and interest to equal $4,290?
4.3 yrs
4.0 yrs
5.2 yrs
4.8 yrs
A man may take $50000 cash or 10 equal monthly payments on a life insurance policy, where
the first payment is to be made immediately. What is the monthly payment if money is worth 3%
compounded monthly?
5069.01
Maria deposits $2,000 in a savings account that pays interest at an annual compound rate of
3%. Two years after the deposit, the interest rate increases to 4% compounded semi-annually. A
second deposit of $3,000 is made immediately after the interest rate changes to 4%. How much
will be in the fund 7 years after the second deposit? (Round off answer to whole number)
Exact answer: 6,758.11
If $10,000 is deposited each year for 9 years, how much annuity can a person get annually from
the bank every year for 8 years starting 1 year after the 9th deposit is made? Interest is 14%.
$34,675.19
$33,872
$31,731
$32,399
If P5,000 shall accumulate for 10 years at 8% compounded quarterly. Find the compounded
interest at the end of 10 years.
2,735.55
Tom's retirement account in a company currently totals $416,384. What perpetual income can
Tom and his heirs receive per year if he retires now and the money is invested in an annuity
earning 6% interest?
$20,980
$24,980 (pag exact value 24983.04)
$26,980
$22,980
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?
12,563.63
(6,751.53 nacompute ko -webb)
Mr. James Louvay owes $25,000 due at the end of 1 year and $75,000 due at the end of 4
years. He agrees to pay $50,000 today and the balance in two years. How much must he pay
at the end of two years if money is worth 5% compounded semi-annually?
$39,021.28
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?
P12,616 (exact: 12,615.81)
P12,609
P12,591
P12,300
Consider the accompanying cash flow series at varying interest rates. What is the equivalent
present worth of the class flow series?
4745-atin
1850 – kanila
5,182.06 – kay webb
An item is purchased for P100,000. Annual cost is P18,000. Using an interest rate of 8%,
what is the capitalized cost of perpetual service?
P319,000
P325,000
P310,000
P322,000
What is the future worth in year 10 of $5,000 at n = 0, $10,000 at n = 3 years, and $8,000 at n =
5 years if the interest rate is 12% per year?
$40,533
$16,657
$51,735 (exact: 51,734.79)
$71,435
A loan of P5,000 is made for a period of 15 months at a simple interest rate of 15%. What future
amount is due at the end of the loan period?
5937.50
You are considering a new punch press machine. This machine will have an estimated service
life of 10 years. The expected salvage value at the end of service life will be 10% of the
purchase cost. Its annual operating cash flows are estimated to be $60,000. If you can purchase
the machine at $308,758 and MARR is set at 10%, what is the expected rate of return (ROR) on
this investment?
15%
A bank charges 12% simple interest on a P300 loan. How much will be repaid if the loan is paid
back in one lump sum after three years?
408
Money borrowed today is to be paid in 6 equal payments at the end of 6 quarters. If the interest
is 12% compounded quarterly, how much was initially borrowed if a quarterly payment is
P2,000?
10,834.38
An investment option is available with continuous compounding at 5% interest. If you invest
$8,000 now, how much interest income will you earn if you cash out in 3.5 years?
1529.97
The officers of the International Leather Company is considering building a plant in
Metro Manila costing P2,250,000. At the end of 12 years, the plant can be sold for
P500,000. It is estimated that sales will be P1,000,000 per year and that labor would cost
annually P100,000 and overhead would be P55,000. Taxes and insurance would be 3% of
the first cost. If MARR is at least 20%.
What is the rate of return of the Metro Manila plant project?
32.6%-atin
34.5% - kanila
By the condition of a will, the sum of P2,000 is left to a girl to be held in trust fund by her
guardian until it amounts to P50,000. When will the girl receive the money if the fund is invested
at 8% compounded quarterly?
40.64 yrs
A bridge with initial cost of P50,000,000 has a life of 20 years. The bridge must be partially re-
built at the end of each 20 years at a cost of P10,000,000. It will have an annual operating cost
of P1,000,000 for the first 10 years and P500,000 thereafter. At 6% annual interest;
59,658,254
(66,823,333.74 nakuha ko -webb)
Find the present worth of a future payment of P100,000 to be made in 10 years with an interest
of 12% compounded quarterly.
30655.68
A sum P1,000 is invested now and left for eight years, at which time the principal is withdrawn.
The interest has accrued and is left for another eight years. If the effective annual interest rate is
5%, what will be the withdrawal amount at the end of 16th year?
705.42
Find the net present worth of the following cash flow series at an interest rate of 8%.
Ans: 4394.95
A newly-built business property, containing a space for a store and two offices, can be
purchased for $1,200,000. A prospective buyer estimates that during the next 10 years
he can obtain annual rentals of at least $458,460 from the property, and the annual outof-pocket expenditure will not exceed $60,000. He believes that he should be able to
dispose of the property at the end of 10 years at not less than $700,000. Annual taxes
and insurance will total 2.5% of the first cost. Assume he has sufficient capital to
purchase the property, and that the minimum attractive return (MARR) he is obtaining
from his capital is 20%.
Compute the payback period of the investment. (in two decimal places)
0.98
Find the present value in pesos, of a perpetuity of P15000 payable semi-annually if money is
worth 8% compounded quarterly
371,287.13
Compute the equivalent rate of 6% compounded semi-annually to a rate compounded quarterly
5.96%
You need P4,000 per year for four years to go to college. Your father invested P5,000 in 7%
account for your educatuon when you were born. If you withdraw P4,000 at the end of you 17th,
18th, 19th, and 20th birthday, how much money will be left in the account at the end of the 21st
year?
1,700 (exact value: 1,699.96)
Maintenance cost of an equipment is P20,000 for 2 years, P40,000 at the end of 4 years and
P80,000 at the end of 8 years. Compute for the semi-annual amount that be set aside for this
equipment. Money worth 10% compounded annually.
P7,425.72 (galing net)
How much money must be invested on Jan1,1998 in order to accumulate P2,000 on Jan. 1,
2003. Money is worth 6%.
P1,494.52
https://quizlet.com/216147177/integrated-course-1-engineering-economics-flash-cards/
https://quizlet.com/393901619/engineering-economy-dean-medina-flash-cards/
1)If there is only one seller and many buyers, the market situation is Monopoly
2)What is defined as any tangible economic product that contributes directly or indirectly
to the satisfaction of human want? Goods or commodities
3)What is the acid test ratio? an index of short term paying ability
4) Consists of the actual counting or determination of the actual quantity of the materials
on hands as of a given date. Physical Inventory
5) Interest that is based on the original amount of the loan. Simple Interest
6) An interest rate of 20% per year, compounded monthly is. Effective Monthly rate
7) When comparing two mutually exclusive alternatives by the ROR method, if the rate
of return on the higher first-cost alternative exceeds that of the lower first-cost
alternative,
(a) The rate of return on the increment of investment between the two is greater than
the overall rate of return for the lower first-cost alternative
(b) The rate of return on the increment of investment is greater than the overall rate of
return for the higher first-cost alternative
(c) The higher first-cost alternative is the better of the two alternatives
(d) All of the above
8) An annuity where the first payment is made several periods after the beginning of the
annuity. Deferred Annuity
Extra
ordinary annuity- he equal payments are made at the end of each compounding period
starting from the first compounding period
annuity due - the equal payments are made at the beginning of each compounding
period starting from the first period.
Perpetuity - payment period extends forever, which means that the periodic payments
continue indefinitely
9) Direct labor cost incurred in the factory and direct materials costs are the costs of all
materials that go into production. The sum of these two direct costs are known as:
Prime Cost
10) Cost of things that are neither labor nor materials
Expenses
11) the present worth of an alternative that provides infinite service is called its:
Capitalized Cost
12) The worth of a property as shown on the accounting records of an enterprise
Book value
13) It calculates the number of years required for cash inflows to just equal cash
outflows Payback Period
14) An index of short term paying ability is called Acid-test ratio
15) What is defined as the analysis and evaluation of the monetary consequences by
using the theories and principles of economics to engineering applications, design and
projects? Engineering economics
17) What is the market situation exist when there are many buyers and many sellers?
Perfect competition
18) Which of the following statements is not one of the four fundamental principles of
engineering economics?
(a) Receiving a dollar today is worth more than a dollar received in the future.
(b) To expect a higher return on investment, you need to take a higher risk.
(c) Marginal revenue must exceed marginal cost to justify any production.
(d) When you are comparing different alternatives, you must not focus only
differences in alternative sources
Which of the following statements is incorrect?
Economic decisions are time variant
Extra
1.Time Value of money – It is better to receive money earlier than later due to the
interest that money accrues over a period of time
2. Difference among the alternatives count – The economic decision is based in the
differences that we have among the alternatives under consideration. The things which
are similar among those alternatives are irrelevant.
3.The Marginal revenue must be greater than Marginal Cost – First evaluate the
benefits of the project internally before comparing it with other alternatives. Therefore
among the different productive sources , the one with minimum marginal cost and
maximum marginal benefit must be choosen
4.Risk and return go hand in hand – To get a greater return, there must be greater risk.
However the risk should be taken calculatively.
19) In most engineering economy studies, the best alternative is the one which:
a) Will last the longest time
b) Is easiest to implement
c) Cost the least
d) Is most politically correct
20) Liquid assets such as cash and other assets that can be converted quickly into
cash, such as accounts receivable, and merchandise are called:
Current assets
21) The worth of a property that is equal to the original cost less depreciation:
Book value
22) Modes of extinguishing obligations when creditor abandons his right to collect:
Condonation
24) Which of the following statements defines the discipline of engineering economics
most closely?
Economic decisions primarily for real assets and services from engineering
projects
25) An artificial expenses that spreads the purchase price of an asset or other property
over a number of years. Depreciation
26) A series of payments that increase or decrease in each succeeding period by a fixed
amount or percentage Compound Interest (Gradient?)
27) In a mutually exclusive set of alternatives, one or more of the alternatives out of the
group can be chosen. FALSE
28) Interest is money paid for the use of equity capital F
29) Material cost is considered from variable costs T
30) Decreasing a company’s fixed expenses should reduce the break-even point. True
32) Which of the following statements is correct?
a. The discount rate that equates the present value of the expected Net Cash
Inflows with the Initial Cash Outflow is known as Internal Rate of Return
b. All of the Choices
c. The present value of the proposal's net cash inflows, less the proposal's initial cash
outflow is known as the Net Present Value
d. The number of years required to recover the initial cash investment in a project, is
called Payback Period
33) The total income equals the total operating cost. Break even-no gain no loss
35) Oligopoly exists when there is/are:
a. few sellers and few buyers
b. few sellers and many buyers
c. many sellers and few buyers
d. one seller and few buyers
36) The worth of a property that is equal to the original cost less depreciation:
book value
37) A diagram drawn to help visualize and simplify problem having diverse receipts and
disbursements
a. Cash-flow
b. Investment
c. Budget
d. Year-end Convention
38) It is the amount that a willing buyer will pay to a willing seller for a property where
each has equal advantage and is not compelled to buy or sell. Market Value
39) What refers to the goods and services that are required to support human life,
needs and activities? Necessity
40) Those funds that are required to make the enterprise or project a going concern:
Working capital
41) The alternatives which are standalone solutions for given situations in engineering
involve:
A.a purchase cost (first cost)
B.the anticipated life of the assest
C.the yearly costs of maintaining the assest (annual maintenance and operating cost)
D.the anticipated resaleable value (salvage value) and the interest return (rate of return)
E.All of these
42) Liquid assets such as cash and other assets that can be converted quickly into
cash, such as accounts receivable, and merchandise are called: Current assets
43) The internal rate of return method is also called as
a. Profitability Method
b. Investor’s Method
c. None of the Above
d. Cash Flow Method
44) An association of two or more individuals for the purpose of operating a business a
co-owners of a profit: Co-partnership
45) The profession in which a knowledge of mathematical and natural sciences gained
by study, experience and practice is applied with judgment to develop ways to utilize
economically the materials and forces for the benefit of mankind. Eng Eco
46) These are products or services that are desired by humans and will be purchased if
money is available after required necessities have been obtained Luxury
What is defined as any tangible economic activity that contributes directly or indirectly to the satisfaction
of human want?
Services
47) Kind of obligation, which has no condition attached. Gratuitous
48) When evaluating a large-scale engineering project, which of the following items is
important?
a) Expected Profitability
B) timing of cash flows
c) degree of financial risk
d) all of the above
Is is defined to be capacity of a commodity to satisfy human want
Utility
49) Instead of the profits being paid out to the stockholders or owners as dividends, they
are retained in the business and used to finance expansion. This is called:
Retained Earnings
50) What market situation exists when there are few sellers and few buyers?
Bilateral oligopoly
51) What is considered as the standard unit which forms the basis of a country's
domestic money supply? Foreign exchange
52) Interest that is earned on prior interest in addition to the principal
Compound Interest
53) An annuity where payments are made at the beginning of each period
Annuity due
54) The quantity of a certain commodity that is offered for sale at a certain price at a
given place and time. Demand
55) The present worth of all depreciation over the economic life of the item is called
Depreciation recovery
56) If company A uses more debt that Company B and both companies have identical
operations in terms of sales, operating costs, etc., which of the following statements is
true?
Company B has a higher profit margin on sales than company A
The peso amount as earned from investment or project is called
a.
ROI
b.
Surplus
c.
ROR
d.
Interest
You are looking to buy stock in a high-growth company. Which of the following ratios best
indicates the company's growth potential?
Price/Earning
A term used to describe payment of an employee for time spent on the property of the employer though
not actually working at the job, e.g. time spent changing clothes to get ready for work or time spent
travelling from the plant entrance to the place of work.
a.
Call-in Pay
b.
Lost Time Pay
c.
Portal-to-Portal Pay
d.
Downtime Pay
Form of summary of assets, liabilities and net worth:
a.
Break-even point
b.
Production
c.
Balance sheet
d.
Balance method
The ratio of the annual revenues to the annual expenses
a.
Income Ratio
b.
Rate of Return
c.
Benefit-Cost Ratio
d.
Benefit Ratio
The study of economic problems with the concept of obtaining the maximum benefit at the least cost
Accounting
Economics
Engineering
Engineering Economy
It is worth of a property as recorded in the book of an enterprice
a.
Price
b.
Scrap Value
c.
Salvage Value
d.
Book Value
What market situation exists where there is only one buyer and only one seller?
a.
Bilateral monopsony
b.
Monopoly
c.
Monopsony
d.
Bilateral Monopoly
Falls after the increase reaches a certain variable amount, this is called
a.
Inflation
b.
Law of Diminishing Return
c.
Process Factor
d.
Law of Supply and Demand
t is the loss of value of equipment with use over a period of time. It could mean the difference in value
between the net asset and the used asset currently in service.
a.
Loss
b.
Gain
c.
Extracted
d.
Depreciation
The difference between the book value and actual lower resale value is:
Sunk cost
Which of the following statements is most correct?
a.
The cash flow statement summarizes how the corporation generated cash during the operating period
b.
None of the Choices
c.
The income statement summarizes the net income produced by the corporation at a specified reporting
date
d.
The balance sheet statement summarizes how much the firm owns as well as owes for a typical
operating period
What is an annuity?
a.
A series of equal payments at equal time periods
b.
The cost of manufacturing a product
c.
The overhead cost per unit of production
d.
An investment that yields an equal amount of interest each year
Juliet • 17:12
Which of the following methods is most suited in evaluating/comparing alternatives with different lives
(finite)?
a.
Rate of return method
b.
Urgency rating method
c.
Present worth method
d.
Uniform annual cost method
Estimated value at the end of the useful life
a.
Compounded Annually
b.
Economic Life
c.
Balance Sheet
d.
Salvage Value
What is the market situation whereby there is only one buyer of an item for which there is no
goods substitute?
Monopsony
What are the two classifications of goods and services?
a.
Raw and finished
b.
Consumer and producer
c.
Ready-made and made-to-order
d.
Local and imported
Pick up the correct statement from the following:
a.
Interest on borrowing = present amount owed - original loan
b.
The change in the amount of money over a given time period is called 'time value' of money, a most
important concept in engineering economy
c.
The original investment (or loan) is referred to as principal
d.
The manifestation of the time value of money is termed as interest
f there are many sellers and few buyers, the market situation is ____________.
a.
Oligopsony
b.
Oligopoly
c.
Duopsony
d.
Monopoly
The length of time during which the property may be operated at a profit
a.
Length of Time
b.
Life
c.
Physical Life
d.
Economic Life
What is considered as the basic consuming or demanding unit of a commodity?
a.
Producer
b.
Manufacturer
c.
Buyer or consumer
d.
Seller
It occurs when a unique product or service is available only from a single supplier and entry of all other
possible suppliers prevented:
a.
Monopoly
b.
Profitability
c.
Competition
d.
Inventory
What is another term for "perfect competition"?
a.
Atomistic competition
b.
No-limit competition
c.
Free-for-all market
d.
Heterogeneous market
Gross profit, sales less cost of goods sold, as a percentage of sales is called
Gross Margin