Let’s Check

Activity 1: Now that you review the most essential principles in engineering economy. Let us
try to check your understanding by solving the following cost problems:

1. A certain equipment costs ₱7000 has an economic life of “n” years and a salvage value
of ₱350 at the end of “n” years. If the book value at the end of 4 years is equal to
₱2197.22, compute the economic life of the equipment using SYDM.

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2. ABC Corporation makes its policy that for every new equipment purchased, the

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annual depreciation cost should not exceed 20% of the first cost at any time without

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salvage values. Determine the length of service if the depreciation used is SYDM.
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3. A consortium of international communications companies contracted for the

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purchase and installation of a fiber optic cable linking two major Asian cities at a total
cost of ₱960,000,000. This amount includes freight and installation charges at 10% of
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the above total contract price. If the cable depreciated over a period of 15 years with
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zero salvage value, what is the depreciation charge during the 5th year using SYDM?
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 4. The corporation purchased a machine for ₱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 salvage value of 12%. Determine the depreciation charge during the
5th year using sum of year’s digit method.

5. A machine that cost ₱1,230,000 has estimated life of 10 years. If the predetermine

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salvage value is ₱80,000. Compute the annual rate of depreciation charge using

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declining balance method.
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