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ENGINEERING ECONOMICS

QUESTIONS

CHOICES

ANSWER

A bank charges 12% simple interest on a P 300.00


loan. How much will be repaid if the loan is paid back
in one slump sum after three years.

a. P 408.00
b. P 415.00
c. P 551.00
d. P 450.00

a. P 408.00

If P 5000.00 shall accumulate for 10 years at 8%


compunded quarterly. Find the compounded
interest at the end of 10 years.

a. P 6,0005.30
b. P 6,000.00
c. P 6,040.20
d. P 6,010.20

c. P 6,040.20

XYZ corporation manufactures bookcases that it sells


for P 65.00 each. It costs XYZ P 35,000.00 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 P
50.00, how many cases must be sold each year for
XYZ to avoid taking a loss?

a. 2,234 cases
b. 539 cases
c. 750 cases
d. 2,333 cases

a. 2,334 cases

An asset is purchased for P 9,000.00. Its estimated


life is 10 years, after which it will be sold for P
1,000.00. Find the book value during the third year if
the sum of the years depreciation (SYD) is used.

a. P 6,100.00
b. P 4,500.00
c. P 5,072.00
d. P 4,800.00

c. 5,072.00

DISCUSSION

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A company issued 50 bonds of P 1,000.00 face value


each, redeemable par at the end of 15 years to
accumulate the funds required for the redemption.
The firm established a sinking fund consisting of
annual deposits, the interest rate of the fund beinbg
4%. What was the principal in the fund a t the end of
the 12th year

a. P 35,938.00
b. P 38,378.00
c. P 41,453.00
d. P 37,519.00

d. P 37, 519.00

An asset is purcahsed for P 500,000.00. The salvage


calue in 25 years is P 100,000.00. What are the
depreciation I the first three years using staight line
method?

a. P 48,000.00
b. P 24,000.00
c. P 32,000.00
d. P 16,000.00

a. P 48,000.00

A house and a lot can be acquired of a


downpayment of P 500,000.00 and a yearly payment
of P 100,000.00 at he end of each year for a period
of 10 years, starting at the end of 5 years from the
date of purchase. If the money is worth 14%
compounded annually, what is the cash price of the
property?

a. P 810,100.00b. P
808,811.00c. P
801,900.00d. P
805,902.00

b. 808,811.00

How much must be deposited at 6% each year


beginning on Jan. 1,year 1, in order to accumulate
P 5,000.00 on the date of the last deposit, Jan.1 ,
year 6?

a. P 751.00
b. P 717.00
c. P 715.00
d. P 725.00

b. P 717.00

An instructor plans to retire in exactly one year and


want an account that will pay him P 25,000.00 a year
for the next 15 years. Assuming a ^5 annual effective
interest rate, what is the amount he would nedd to
deposit now? (The fund will be depleted after 15
years)

a. P 249.000.00
b. P 242,806.00
c. P 248,500.00
d. P 250,400.00

b. P 242,806.00

P 1,500.00 was deposited in a bank account 20 years


ago. Today it is worth P 3,000.00. Interset is paid
semi-annually. Determine ther interest rate paid on
this account.

a. 3%
b. 2.9%
c. 3.5%
d. 4%

c. 3.5 %

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If the nominal interest rate is 3%, how much is P


5,000.00 worth in 10 years I a continuosly
compounded account?

a. P 5,750.00
b. P 6,750.00
c. P 7,500.00
d. P 6,350.00

b. P 6,350.00

A piece of machinery can be bought for P 10,000.00


cash of for P 2,000.00 sown and payments of P
750.00 per year for 15 years. What is the annual
interest rate for the time payments?

a. 4.61%
b. 3.81%
c. 5.71%
d. 11.0%

a. 4.61%

A machine has an initial cost of P 50,000.000 and a


salvage value of P 10,000.00 agetr 10 years. What is
the book value afeter 5 years using straight line
depreciation?

a. P 35,000.00
b. P 25,000.00
c. P 15,000.00
d. P 30,000.00

d. P 30,000.00

It is the practice of almost all bank in the Philippines


that whrn they grant aloan, the interest for one year
is automatically deductedthe principal amount upon
releaseof money to a borrower. Let us therefore
assume that you apllied for a loan with a bank ant
the P 80,000.00 was approved at an interest rate of
14% of which was deducted and you were given a
check of P 68,800.00. Since you have pay the
amount of
P 80,000.00 one year after, what
will be the effective interset rate?

a. 15.90%
b. 16.28%
c. 16.30%
d. 16.20%

b. 16.28%

A company purchases an asset for P 10,000.00 and


plans to keep it for 20 years. If the salvage value is
zero at the end of the 20th year, what is the
depreciation in the third year? Use the sum of the
years digits depreciation

a. P 1,000.00
b. P857.00
c. P 937.00
d. P 747.00

b. P 857.00

An asset is purchase for P 9,000.00 Its estimated life


is 10 years after which it will be sold for P 1,000.00.
find the book value during the first year if sum of the
years (SYD) depreciation is used.

a. P 8,000.00
b. P 6,500.00
c. P 7,545.00
d. P 6,000.00

c. P 7,545.00

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A parent on the day the child is born wishes to


determine what lupsim would have to be oaid into
an accoun bearing interest at 5% compounded
annually in order to withdraw P 20,000.00 each on
the childs 18th, 19th, 20th and 21st birthdays.

a. p 35,941.33
b. p 33,941.33
c. P 30,941.33
d. P 25,941.33

c. P 30,941.33

A merchant puts his P 2,000.00 to a small business


for a period of 6 years. With a given interest rate ont
eh investment of 15% per year, compounded
annually, how much will he collect at the end of the
6th year?

a. P 4,400.00
b. P 4,390.00
c. P 4,200.00
d. P 4,626.00

d. P 4,626.00

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 P 2,000.00 bonus

a. P 12,608.00
b. P 12,615.00
c. P 12,600.00
d. P 12,300.00

b. P 12,615.00

The sum of P 1,000.00 is invested now and left for 8


years, atr which time, the principal is withdrawn. The
interest that has accrued is left for another eight
years. If the effective annual interest rate is 5%,
what will be the withdrawal amount at the end of
the 16th year?

a. P 706.00
b. P 500.00
c. P 774.00
d. P 779.00

a. P 706.00

A company which manufactures electric motors has


a production capacity of 200 motors a month. The
varaible costs are P 150.00 per motor. The average
selling price of the mptors is P 275.00. Fixed costs of
the company amount to P 20,000.00 per month
which includes taxes. the number of motors that
must be sold to break even is closest to :

a. 40
b. 150
c. 80
d. 160

d. 160

by the condition of a will, the sum of P 20,000.00 is


let to a girl to be hekd in a trust fund by her
guardianuntil it amounts to P 50,000.00. When will
the girl received the money if the fund is to be
unvested at 8% compounded quarterly

a. 7.98 years
b. 10.34 years
c. 11.57 years
d. 19.45 years

c. 11.57 years

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How much money must be invest todeay in order to


withdraw P 2,000.00 annually for 10 years if the
interst rate is 9%?

a. P 12,853.32
b. P 12,881.37
c. P 12,385.32
d. P 12,835.32

d. P 12,835.32

Money borrowed today is to be paid in equal


payments at the end of 6 quarters. If the interest is
12% compounded quarterly. How much was initially
borrowed if quarterky payment is P 2,000.00

a. P 10,834.38
b. P 12,382.90
c. P 10,586.99
d. P 10,200.56

a. P 10,834.38

What will be the future worth of money after 12


months, if the sum of P 25,000.00 is invested today
at simple interest of 1% per year?

a. P 30,000.00b. P
29,000.00c. P
28,000.00d. P
27,859.00

c. P 28,000.00

A man expects to receive P 25,000.00 in 8 years.


How much is that money worth now considering
interest at 8% compounded quarterly?

a. P 13,859.12
b. P 12,958.33
c. P 12,675.23
d. P 13,265.63

d. P 13,265.33

a. 9 yrs
b. 10 yrs
c. 12 yrs
d. 19 yrs

a. 9 yrs

At an interest rate of 10% compounded annually,


how much will a deposit of P 1,500.00 be in 15
years?

a. P 6,100.00
b. P 6,234.09
c. P 6,265.87
d. P 6,437.90

c. P 6,265.87

What is the accumulated amount of five year


annuuity paying P 6,000.00 at he end of each year,
wuth the interst at 15% compounded annually.

a. P 40.454.29
b. P 41,114.29
c. P 41,454.29
d. P 49,544.29

a. P 40, 454.29

ABC Corporation makes it a apolicy that for every


new equipmentpurchased, the annual depreciation
cost should not exceed 20% of the first cost at any
time without the salvage value. Determine the
length of service life if the depreciation used is the
SYD method

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A debt of P 10,000.00 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
payment.

a. P 1,200.00
b. P 1,295.05
c. P 1,193.90
d. P 1,400.00

b. P1,295.05

The effective rate of 14% compounded semiannually is:

a. 14.49%
b. 12.36%
c. 14.94%
d. 14.88%

a. 14.49%

How many years will P 100,000.00 earned a


compound interest of P 50,000.00 if the interest rate
is 9% compounded quarterly?

a. 4.55
b. 3.55
c. 5.68
d. 2.35

a. 4.55

A machine costing P 720,000.00 is estimated to have


a life of 10 years . If the annual rate of depreciation
is 25%, determine the total depreciation using the
constant percentage or declining balance method.

a. P 352,845.34
b. P 785,437.23
c. P 679,454.27
d. P 764,243.33

c. P 679,454.27

A man borrowed P 300,000.00 from a lending


institutionwhich will be paid after 10 years at an
interset rate of 12% cpmpounded annually. If money
is worth 8% per annum how much should he deposit
to a bank monthly in order to discharge his debt 10
yrs hence?

a. P 2,798.52
b. P 3,952.50
c. P 4,672.31
d. P 5,093.06

d. P 5,093.06

Mr. Cruz plans to deposit for the education of his 5


year old son, P 500.00 at he end of each month for
10 years at 12% annual interest compounded
monthly. The amount that will be available in two
years is:

a. P 13,000.00b. P
14,500.00c. P
13,500.00d. P
14,500.00

c. P 13,500.00

The annual maintenance cost of a machine shop is P


69,994.00. If the cost of making is p 56.00 per unit
and its selling price is P 135.00 per forged unit find
the number of units to be forged to break-even.

a. 886 units
b. 885 units
c. 688 units
d. 668 units

a. 886 units

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The machine has an initial cost of P 50,000.00 and


salvage value of P 10,000.00 after 10 years. Find the
book value after 5 years using the straight line
depreciation

a. P 30,000.00
b. P 20,000.00
c. P 10,000.00
d. P 40,000.00

a. P 30,000.00

A young engineer borrowed P 10,000.00 at 12%


interest and paid P 2,000.00 per annum for the first
4 years. What does he have to pay the end of the 5th
year in order to pay off his loan/

a. P 6,922.93
b. P 6,292,93
c. P 9,622.93
d. P 9,262.93

a. P 6,922.93

A small machine has an initial cost of P 20,000.00, a


salvage value of P 2,000.00 and alife of 10 years.
Determine the annual depreciation.

a. P 1,200.00
b. P 1,400.00
c. P 1,800.00
d. P 1,600.00

c. P 1,800.00

Mandarin Bank advertises 9.5% accounts that yield


9.84 % annually. Find How often is the interest
compounded?

a. monthly
b. quarterly
c. semi-annually
d. continuosly

b. quarterly

John borrowed P 50,000.00 from the bank at 25%


compounded semi-annually. What is the
corresponding effective rate of interest?

a. 25.56%
b. 26.56%
c. 21.66%
d. 12.56%

b. 25.56%

Find the present worth of a future payment of


P 300,000.00 to be made in 5 years with an interest
rate of 8% per annum

a. P 200,174.96
b. P 204,174.96
c. P 240,174.96
d. P 217,404.96

b. P 204,174.96

a. P 101,107.11
b. P 170,110.11
c. P 107,110.11
d. P 100,711.11

d. P 100,711.11

The corporation purchased a machine for P 1 million.


Freight and installation charges amounted to 3% of
the purchase price. If the machine shall be
depreciated over a period of 8 years with a salveage
value of 12%. Determine the depreciation charged
during the 5th year using the sum ot the years digit
method

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How long will it take money to double itself if


invested at 5% compounded annually?

a. 7 years
b. 28 years
c. 14 years
d. 21 years

a. 7 years

What is the present worth of a 3 years annually


paying P 3,000.00 at the end of each year, with
interest at 8% compounded annually.

a. P 7,731.29b. P
9,731.79c. P
7,371.29d. P 9,371.79

a. P 7,731.29

A man borrowed P 2,000.00 from a bank and


promise to pay th amount for one year. He received
on the amount of P 1,920.00 after the bank collected
and advance interest of P 80.00. What was the rate
of discount and the rate of interest that the bank
collected in advance?

a. 4 %, 4.17%
b. 3 %, 3.17%
c. 4 %, 4.715
d. 3%, 3.71%

a. 4%, 4.17%

The value on a given date of a future payment or


series of future payments, discounted to reflect the
time value of money and other factors such as
investment risk.

a. Present Worth
b. Annual worth
c. Future Worth
d. Capitalized Worth

a. Present Worth

A capital budgeting metric used by firms to decide


whether they should make investments.

a. Internal Rate Of
Return
b. Net Present value
c. Cost of Capital
d. External Rate of
Return

a. Internal Rate of Return

a. Present Worth
b. Annual worth
c. Future Worth
d. Capitalized Worth

c. Future Worth

a. life cycle
assessment
b. Whole life cost
c. life cycle savings
d. life cycle cost
analysis

b. Whole life cost

Measures the nominal future sum of money that a


given sum of money is "worth" at a specified time in
the future assuming a certain interest rate, or more
generally, rate of return; it is the present value
multiplied by the accumulation function

Refers to the total cost of ownership over the life of


an asset. Also commonly referred to as "cradle to
grave" or "womb to tomb".

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