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ENGINEERING ECONOMY

1. 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 lump sum after three years?

a. P 408.00

b. P 415.00

c. P 551.00

d. P 450.00

compounded interest at the end of 10 years.

a. P 6,005.30

b. P 6,000.00

c. P 6,040.20

d. P 6,010.20

3. XYZ Corporation manufactures bookcases that it sells for P 65.00 each. It costs

XYZ P35,000.00 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. 2,334 cases

b. 539 cases

c. 750 cases

d. 2,333 cases

4. 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 digit (SYD) depreciation is used.

a. P 6,100.00

b. P 4,500.00

c. P 5,072.20

d. P 4,800.00

the end of 15 years to accumulate the funds required for redemption. The firm

established a sinking fund consisting of annual deposits, the interest rate of the

fund being 4%. What was the principal in the fund at the end of the 12 th year?

a. P 35,938.00

b. P 38,378.00

c. P 41,453.00

d. P 37,519.00

P100,000.00 What are the depreciation in the first three years using straight line

method?

a. P 48,000.00

b. P 24,000.00

c. P 32,000.00

d. P 16,000.00

7. A house and a lot can be acquired a down payment of P 500,000.00 and a yearly

payment of P 100,000.00 at the 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 810,100.00

b. P 808,835.00

c. P 801,900.00

d. P 805,902.00

order to accumulate P 5000.00 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

9. 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 6% annual effective

interest rate, what is the amount he would need 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

10. P 1,500.00 was deposited in a bank account 20 years ago. Today it is worth

P3,000.00. Interest is paid semi-annually. Determine the interest rate paid on this

account?

a. 3.0%

b. 2.9%

c. 3.5%

d. 4.0%

11. If the interest rate is 3%, how much is P 5000.00 worth in 10 years in a

continuously compounded account?

a. P 5,750.00

b. P 6,750.00

c. P 7,500.00

d. P 6,350.00

12. A piece of machinery can be bought for P 10,000.00 cash or for P 2,000.00 down

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%

13. A machine has an initial cost of P 50,000.00 and a salvage value of P 10,000.00

after 10 years. What is the book value after 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

14. It is the practice of almost all bank in the Philippines that when they grant a loan,

the interest for one year is automatically deducted the principal amount upon

release of money to a borrower. Let us therefore assume that you applied for a

loan with a bank and 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

to pay the amount of P 80,000.00 one year after, what then will be the effective

interest rate?

a. 15.90%

b. 16.28%

c. 16.30%

d. 16.20%

15. 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 20 th year, what is the depreciation in

the third year? Use sum of the years digits depreciation.

a. P 1000.00

b. P 857.00

c. P 937.00

d. P 747.00

16. 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 first year if sum of the

years digit (SYD) depreciation is used.

a. P 8,000.00

b. P 6,500.00

c. P 7,545.00

d. P 6,000.00

17. A parent on the day the child is born wishes to determine what lump sum would

have to be paid into an account bearing interest at 5% compounded annually, in

order to withdraw P 20,000.00 each on the childs 18 th, 19th, 20th and 21st

birthdays.

a. P 35,941.73

b. P 33.941.73

c. P 30,941.73

d. P 25,941.73

18. A merchant puts his P 2000.00 to a small business for a period of 6 years. With a

given interest rate on the 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 4,390.15

c. P 4,200.00

d. P 4,626.00

19. 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 2000,00 bonus?

a. P 12,608.00

b. P 12,615.80

c. P 12,600.00

d. P 12,300.00

20. The sum of P 1000.00 is invested now and left for 8 years, at 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 705.42

b. P 500.00

c. P 774.00

d. P 779.00

21. A company which manufactures electric motors has a production capacity of 200

motors a month. The variable costs are P 150.00 per motor. The average selling

price of the motors is P 275.00. Fixed costs of the company amount to

P20,000.00 per month which includes taxes. The number of motors that must be

sold each month to break even is closest to:

a. 240

b. 150

c. 280

d. 160

22. By the condition of a will, the sum of P 20,000.00 is left to a girl to be held in trust

fund by her guardian until it amounts to P 50,000. When will the girl received the

money if the fund is to be invested at 8% compounded quarterly.

a. 17.98 yrs

b. 10.34 yrs

c. 11.57 yrs

d. 10.45 yrs

23. How much money must you invest today in order to withdraw P 2000 annually for

10 years if the interest rate is 9%?

a. P 12,853.32

b. P 12,881.37

c. P 12,385.32

d. P 12,835.32

24. 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

quarterly payment is P 2000.

a. P 10,834.38

b. P 10,382.90

c. P 10,586.99

d. P 10,200.56

25. What will be the future worth of money after 12 months, if the sum of P 25,000 is

invested today at simple interest rate of 1% per year?

a. P 30,000

b. P 29,000

c. P 28,000

d. P 27,859

26. A man expects to receive P 25,000 in 8 years. How much is that money worth

now considering interest at 8% compounded quarterly?

a. P 13,859.12

b. P 13,958.33

c. P 13,675.23

d. P 13,265.63

27. ABC Corporation makes it a policy that for every new equipment purchased, the

annual depreciation cost should not exceed 20% of the first cost at any time

without salvage value. Determine the length of service life if the depreciation

used is the SYD method.

a. 9 years

b. 10 years

c. 12 years

d. 19 years

28. At an interest rate of 10% compounded annually, how much will a deposit of

P1,500 be in 15 years?

a. P 6,100.00

b. P 6,234.09

c. P 6,265.87

d. P 6,437.90

29. What is the accumulated amount of five year annuity P 6,000.00 at the end of

each year, with interest at 15% compounded annually.

a. P 40,454.29

b. P 41,114.29

c. P 41,454.29

d. P 40,544.29

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 1,400.40

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