Republic of the Philippines

Polytechnic University of the Philippines

Sta. Mesa Manila
College of Engineering

1. A man wishes to accumulate

3722P after
5 yrs, 8 months and 28 days.
How much
should be deposited by the man in
a bank if
the ordinary simple interest is
15% per
annum?
Name: Cajefe, John Mark Z. Date: February 8, 2021
Subject: Engineering Economics Program/Year&Section: BSRE 2-1

Final Examination

Encircle the correct answer.

1. A man deposits P50,000 in a bank account at 6% compounded monthly for 5 years. If the inflation
rate of 6.5% per year continues for this period, will this effectively protect the purchasing power of the
original principal?

a. 49,325 ` c. 49,425
b. 49,225 d. 48,225

2. What is the future worth of P600 deposited at the end of every month for 4 years if the interest rate
is 12% compounded quarterly?

a. P36,541 c. P36,441
 Republic of the Philippines
Polytechnic University of the Philippines
Sta. Mesa Manila
College of Engineering

b. P35,541 d. P36,641

3-6. M purchased a small lot in a subdivision, paying P200,000 down and promising to pay P15,000 every
3 months for the next 10 years. The seller figured interest at 12% compounded quarterly.

3. What was the cash price of the lot?

a. P546,722 c. P545,722
b. P545,622 d. P546,522

4. If M missed the first 12 payments, what was must he pay at the time the 13 th is due to bring himself up
to date?

a. P234,271 c. P234,270
b. P235,271 d. P234,370

5. After making 8 payments, M wished to discharge his remaining indebtedness by a single payment at
the time when the 9th regular payment was due, what must he pay in addition to the regular payment
then due?

a. P300,000 c. P300,106
b. P300,006 d. P306,000

6. If M missed the first 10 payment, what must he pay when the 11 th payment is due to discharge his
entire indebtedness?

a. P479,948 c. P476,948
b. P479,848 d. P477,948

7. A man wishes to provide a fund for his retirement such that from his 60 th to 70th birthdays he will be
able to withdraw equal sums of P18,000 for his yearly expenses . He invests equal amount for his 41 st to
59th birthdays in a fund earning 10% compounded annually. How much should each of these amounts
be?

a. P3,385 c. P2,385
b. P3,485 d. P2,285

8-9. Power to a remote transmitting station is provided by a Diesel-electric generator unit. The original
cost of the unit is P65,000. It costs P2,000 to ship the unit to the job site. An additional cost of P3,000
was incurred for installation.

8. Determine, the annual depreciation cost by the straight line method, if the unit has an expected life of
10 years. The salvage value of the unit at the end of its life was estimated at P5,000.

a. P6,600 c. P6,500
 Republic of the Philippines
Polytechnic University of the Philippines
Sta. Mesa Manila
College of Engineering

b. P6,005 d. P6,006
9. Determine the annual depreciation cost by the sinking fund method. Assume that the annual charge
for depreciation was deposited in a fund drawing compound interest at the rate of 5%.

a. P5,178 c. P6,168
b. P5,168 d. P6,178

10-11. A telephone company purchased a microwave radio equipment for P6,000,000. Freight and
installation charges amounted to 3% of the purchase price. If the equipment shall be depreciated over a
period of 8 years with a salvage value of 5%, determine the following:

10. Annual depreciation charge using the straight line method.

a. P734,875 c. P732,875
b.P734,975 d. P733,875

11. Depreciation charge during the fifth year using the sum-of-the-years-digits method.

a. P652,333 c. P654,333
b. P653,333 d.P655,333

12. A cement kiln with production capacity of 130 tons per day (24hours) of clinker has at its burning
zone about 45 tons of magnesite chrome bricks being replaced periodically, depending on some
operational factors and the life of the bricks.

If locally produced bricks costsP25,000 per ton and have a life of 4 months, while certain imported
bricks costing P30,000 per ton and have a life of 6 months, determine the more economical bricks and by
how much.

a. Imported bricks are more economical by P56,250 per month

b. Imported bricks are more economical by P65,250 per month
c. Local bricks are more economical by P65,250 per month
d. Local bricks are more economical by P56,250 per month

13-14. A firm is charged P150 per ton for hauling its raw materials by a trucking company. Forty tons per
day are hauled for 300 days a year. It is a desired to install a railway system which would bring down the
cost of hauling to P6.60 per ton. Maintenance cost of this is P12,000 per month. Tax is 1%. Average rate
of earning is 20%.

13. If the company has the cash necessary for the installation would you recommend the change?

a. Rate of return is 26.68% investment is justified.

b. Rate of return is 26.78% investment is justified.
c. Rate of return is 27.68% investment is justified.
d. Rate of return is 28.68% investment is justified.
 Republic of the Philippines
Polytechnic University of the Philippines
Sta. Mesa Manila
College of Engineering

14. If the company has to float P5,000,000 worth of non-callable bonds at 15% that will mature in 10
years to have the capital for the project, would you recommend the change?

a. Rate of return is 11.61% investment is not justified

b. Rate of return is 11.71% investment is not justified
c. Rate of return is 10.71% investment is not justified
d. Rate of return is 10.61% investment is not justified

15. It is desired to determine the present economic value of an old machine by considering of how it
compares with the best modern machine that could replace it. The old machine is expected to require
out-of-pocket costs of P85,000 each year for 4 years and then be scrapped for P5,000 residual value.
The new machine requires an investment of P40,000 and would have out-of-pocket costs of P79,000 a
year for 8 years and then zero salvage value. Invested capital should earn a minimum return of 15%
before taxes. Determine the present value of the old machine.

a. P11,500 c. P11,200
b. P12,500 d. P12,200
16-17. A local company assembling stereo radio cassette produces 300 units per month at a cost of P800
per unit. Each stereo radio cassette sells for P1,200. If the firm makes a profit of 10% on its 10,000
shares with a par value of P200 per share, and the fixed costs are P20,000,000 per month.

16. What is the break –even point?

a. 50 units per month

b. 60 units per month
c. 70 units per month
d. 80 units per month

17. How much is the loss of profit if only 100 units are produced in a given month?

a. P4,444 per month

b. P3,333 per month
c. P3,433 per month
d. P3,533 per month

18-20. A plant produces 300 units of an equipment a month of P3,600 each. A unit sells for P4.00. The
company has 10,000 shares of stock at P200 par value whose annual dividend is 20%. The fixed cost of
production is P120,000 a month.

18. What is the break-even point?

a. 200 units/month
b. 400 units/month
c. 100 units/month
d. 300 units/month
 Republic of the Philippines
Polytechnic University of the Philippines
Sta. Mesa Manila
College of Engineering

19. What is the “unhealthy point”?

a. 128 units/month
b. 138 units/month
c. 148 units/month
d. 158 units/month

20. What is the profit or loss if production is 60% of capacity?

a. P63,667 per month

b. P64,667 per month
c. P62,766 per month
d. P62,667 per month