EXAM 1.

ENGINEERING ECONOMY
Name: ________________________________________ Course/Yr.: _____________ ID No.: ___________

TEST I. MULTIPLE CHOICE. <10 points>

1. Of the five engineering economy symbols P, F, A, i, and n, every problem will involve at least how
many of them?
a. Two
c. Three
b. Four
d. all of them
2. Of the five engineering economy symbols P, F, A, i, and n, every problem will have at least how
many of them given?
a. One
c. Two
b. Three
d. Four
3. An example of an intangible factor is
a. Taxes
c. goodwill
b. labor costs
d. rent
4. Amounts of P1000 1 year ago and P1345.60 1 year hence are equivalent at what compound interest
rate per year?
a. 12.5% per year
c. 14.8% per year
b. 17.2% per year
d. None of the above
5. What simple interest rate per year would be required to accumulate the same amount of money in
2 years as 20% per year compound interest?
a. 20.5%
c. 21%
b. 22%
d. 23%
6. When an interest rate, such as 3%, does not include the time period, the time period is assumed to
be what?
a. Days
c. months
b. Years
d. hours
7. In economic analysis, revenues and costs are examples of what?
a. Income
c. cash flow
b. Interest
d. none of the above
8. Interest is a manifestation of what general concept in engineering economy?
a. Alternative
c. cash flow
b. Intangible factor
d. time value of money
9. The term that describes compensation for renting money is what?
a. Principal
c. loan amount
b. Interest
d. none of the above
10. The original amount of money in a loan transaction is known as what?
a. Interest
c. principal
b. Time
d. number of periods

TEST II. IDENTIFICATION <15 points>

1.
2.
3.
4.

Define Engineering Economy.

What is meant by the term evaluation criterion?
What is meant by the term intangible factors? Give three examples of intangible factors.
Of the fundamental dimensions length, mass, time, and electric charge, which one is the most
important in economic analysis and why?
5. All engineering economy problems will involve which two of the following symbols: P, F, A, i, n?

TEST III. APPLICATION <25 points>

1. In order to build a new warehouse facility, the regional distributor for Valco Multi-Position Valves
borrowed P1.6 million at 10% per year interest. If the company repaid the loan in a lump sum
amount after 2 years, what was (a) the amount of the payment, and (b) the amount of interest?
2. A sum of P2 million now is equivalent to P2.42 million 1 year from now at what interest rate?
3. How many years would it take for an investment of P280,000 to accumulate to at least P425,000 at
15% per year interest?
4. Construct a cash flow diagram for the following: P10,000 outflow at time zero, P3000 per year
inflow in years 1 through 5 at an interest rate of 10% per year, and an unknown future amount in
year 5.
5. What is the future worth 6 years from now of a present cost of P175,000 to Corning, Inc. at an
interest rate of 10% per year?