1. (15 pts)
The company expects to retire an existing machine at the end of 2025 and will replace it with a new
machine for the same task at an estimated cost of P700, 000. The old machine is expected to be sold for
P50,000 when it is replaced. To provide for replacement, the company intends to deposit the following
amount in an account earning interest at 10% compounded quarterly:
P150,000 at the end of 2021
P150,000 at the end of 2022
P100,000 at the end of 2023
P100,000 at the end of 2024
Will these be enough for the planned replacement? If yes, then by how much is left for the company or
if not then how much is needed at the end of 2025?
2. (20 pts)
A P22,000,000 chemical plant had an estimated life of 10 years and a projected scrap value of
P2,000,000. After 5 years of operation, an explosion made it a total loss. How much money would have
to be raised to put a new plant costing P30M if depreciation reserved is maintained during its 5 years of
operations using:
a. SFM at 6% interest
b. DBM
c. SYDM
3. (15 pts)
A P10M of 4% 15-year bond was sold at 95%. If miscellaneous initial expenses of the financing were
P200,000 and a yearly expense of P20,000 is incurred. What is the true interest rate that the company is
paying for the money it borrowed? Use interpolation/analytic geometry in solving for interest rate.
4. (20 pts)
Financial analysis of two type of bridges based on capitalized cost and on the following data is to be
made:
Bridge A
Bridge B
Initial Cost
P20,000,000
P24,000,000
Cost of renewal
20,000,000
24,000,000
Salvage Value
0
2,000,000
Annual maintenance
100,000
None
Repairs every 5 years
1,000,000
500,000
Life
30 years
40 years
5. (15 pts)
Juan dela Cruz inherited P500,000 on his birthday. This is placed in how own pension fund (bank
account), which earns interest at 6% compounded annually. He withdraws P1,000,000 on his 35th
birthday to make initial payment on a house. He draws his annual uniform payment for the pension fund
on his 61st birthday and planned to make 20 such withdrawals so as to just exhaust the fund. He died at
age of 71, however, just before withdrawing the amount due on that date. How much is left in fund to
be passed on to heirs at the time of Juan’s death?
6. (15 pts)
Compute the x and P in the figure shown.