ENGR 315 ENGINEERING ECONOMICS
PROBLEM 1
A business firm contemplating the installation of labor
saving machinery has a choice between two different
models. Machine A will cost P36,500, while Machine B
will cost P36,300. The repairs required for each machine
are as follows.
Machine A: P1,500 at the end of the 5th year
P2,000 at the end of 10th year
Machine B: P3,800 at the end of the 9th year
The machines are alike in all other aspects. If this firm is
earning 7% return on its capital, which machine should
be purchase? And what is the net savings?
ACTIVITY 1
PROBLEM 2
A manufacturing firm contemplates retiring an existing
machine at the end of 1982. The new machine to
replace the existing one will have an estimated cost of
P10,000. This expense will be partially defrayed by sale
of old machine as scrap for P750. To accumulate the
balance of the required capital, the firm will deposit the
following sums in an account earning interest at 5%
compounded annually.
P1,500 at the end of 1979
P2,000 at the end of 1981
What cash disbursement will be necessary at the end of
1982 to purchase the new machine?