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Engineering Economy

Name: ___________________________ Date: ________________


Yr./ Sec. : _________________________ Signature:_____________

1. The Asset Privatization Trust had put up for scale a machine tools manufacturing plant.
There were 2 bidders with the following proposals.

Bidder A offered P10M payable 20% down payment, the balance payable P1M annually for 8
years.

Bidder B offered P9M payable P2M down payment, the balance payable P0.5M semi-
annually for 7 years.

Which bid is more beneficial to APT and how much is the difference if money is worth 10%
effective?

2. A man inherited a regular endowment of P100,000 every end of 3 months for 10 years.
However, he may choose to get a single lump sum payment at the end of 4 years. How much
is this lump sum if the cost of money is 14% compounded quarterly?

3. A service car whose cash price was P540,000 was bought with a down payment of
P162,000 and monthly instalments of P10,874.29 for 5 years. What was the rate of interest if
compounded quarterly?

4. A small business company is preparing a schedule of funds to form a sinking fund for
future expansion. The schedules of funds are as follows:

Present year, n - 8000
n+1 - 7000
n+2 - 6000
n+3 - 5000
n+4 - 4000

By the end of the 5
th
year, the company will purchase equipment needed for the improvement
and expansion of the company costing P60,000. If money is worth 16% by the company, how
much money will be needed to supplement the sinking fund?

5. 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?