Module 2:

Money - Time Relationships and Equivalence

Learning Activities

Engineering Economics

Name of Student/s: Dickinson, Sigienel

Gabriel, Neil Patrick A.

Instructor: Engr. Augustine Buenaventura

HONESTY CLAUSE

As individuals of academic community. Students are expected to understand and uphold

requirements of intellectual and educational integrity. The college assumes as a simple and
minimal preferred of habits in academic matters that students be truthful and that they
publish for deposit solely the merchandise of their efforts.
 Learning Activity 1:
Solve the following problem systematically and box the final answer with its appropriate units.
Write the question and the complete solution in the prescribed format.
1. For the period from Jan. 15 to Nov. 28, 2020, calculate the simple interest on P5,000, if
the interest rate is 22 percent.

2. What is the annual interest rate if a P15,000 investment receives $265 in 4 months?
3. What is the future equivalent of P10000 invested for 4 and 1/2 years at 10% simple
interest per year?

4. A principal of $2000 is placed in a savings account at 3% per annum compounded

annually. How much is in the account after one year, two years, and three years?
After one year

5. To have a total of $10,000 after 8 years, what principal do you have to deposit in a 4.5
percent saving account compounded monthly?
F = P(1 + i)n
10,000 = P(1 + 0.045)8
$7031.85
Learning Activity #2
Solve the following problem systematically and box the final answer with its appropriate units.
Write the question and the complete solution in the prescribed format. Submit your scanned
work on the provided link on Google Classroom
1. By better balancing the size of the goods to be delivered to the size of the shipping
container, a business that sells high-purity laboratory chemicals is considering investing
in new equipment that would minimize cardboard costs. If the procurement and
construction of the new equipment cost $220,000, how much does the company save
every year for 3 years to justify the investment if the interest rate is 10 percent a year?
2. As reagents bind to the ceramic piston and deteriorate the seal, syringe pumps frequently
fail. Trident Chemical proposed an effective polymer fluid seal that provides the sealing
lip with a higher sealing force resulting in extended sealing life. One of Trident's customers
expects the latest seal configuration to minimize downtime by 30 percent. If lost
production for the next four years would cost the company $110,000 a year, how much
will the company afford to spend on the new seals now if it uses an interest rate of 12
percent per year?

3. By 2016, the National Highway Traffic Safety Administration had increased the average
fuel economy requirement for cars and light trucks to 35.5 miles per gallon. In the 2012
model year, the rules would cost customers an average of $434 more per car. If a person
buys a new car in 2012 and keeps it for 5 years, how much fuel costs must be saved
every year to justify the extra cost? Using the 8% per annum interest rate.
4. A business producing self-clinching fasteners plans to buy new production-line equipment
in three years. If the new units would cost $350,000, how much does the company set
aside per year, if the account receives 10 percent a year? A=350,000(A/F,i%,N)

5. Mr. Reyes borrows P600, 000 at 12 percent compounded annually and agrees to repay
the loan in 15 equivalent installments annually. Since he made the 8th deposit, how much
of the original principal is still unpaid? P=600,000
I=0.12
N=15
LEARNING ACTIVITY #3
Solve the following problem systematically and box the final answer with its appropriate units.
Write the question and the complete solution in the prescribed format. Submit your scanned
work on the provided link on Google Classroom

1. In each of the last 3 years, the student's profits from recycling paper, cardboard,
aluminum, and glass have risen at a steady rate of $1100. If the profit of this year (end
of year 1) is predicted to be $6000 and the profit pattern persists into year 5,
(a) what is the profit at the end of year 5 and
(b) what is the present value of the profit at an interest rate of 8 percent per annum?

2. For high-precision applications such as water jet cutting, rolled ball screws are
appropriate. Due to improved efficiency, their overall manufacturing costs are projected
to decrease, as seen in the table. Determine at an interest rate of 8 percent per year the
equivalent annual expense.
3. Evaluate the present worth of a sequence of geometric gradients with a $50,000 cash
flow in year 1 and a rise of 6 percent per year through year 8. The rate of interest per
year is 10 percent.

4. Determine the present value difference of the following two contracts at an interest rate
of 8 percent per year.
a. In year 1, contract 1 has a cost of $10,000; for 10 years, costs would rise at a
rate of 4 percent per year.
b. Contract 2 has the same cost in year 1, but for 11 years, costs will rise to 6
percent per annum.
LEARNING ACTIVITY 4:
Solve the following problem systematically and box the final answer with its appropriate units.
Write the question and the complete solution in the prescribed format. Submit your scanned
work on the provided link on Google Classroom
1. For a Federal Credit Union that provides a compounded quarterly interest rate of 8
percent per year, assess the nominal rate per 6 months.
Solution;
Nominal interest rate = (number of month in a year/interest period)(interest rate
compounded quarterly/Number of month in a quarter)

2. An interest rate of 21 percent per year, compounded every four months, is equal to what
rate per year is effective?

3. How much can Wells Fargo lend to a developer who will repay the loan by selling 6 view
lots at $190,000 every 2 years from now? Assume the bank will lend at a nominal 14%
per year, compounded semiannually.
4. Heyden Motion Solutions ordered $7 million worth of seamless tubes for its drill collars
from the Timken Company of Canton, Ohio. (A drill collar is the heavy tubular
connection between a drill pipe and a drill bit.) At 12% per year, compounded
semiannually, what is the equivalent uniform cost per semiannual period over a 5-year
amortization period?

Thus, the equivalent uniform cost per semiannual period is $951,090

5. For assembling its new Dreamliner Commercial airliner, Boeing has ordered composite
wing fixtures. Assume that it costs $3 million to install this device and an extra $200,000
a year for all costs of supplies, service, workers, and maintenance. 10 years is a planned
life. For each 6-month cycle that is required to recover the investment, interest, and
annual costs, an engineer needs to estimate the total revenue requirement. If capital
funds are measured at 8 percent per year, compounded semiannually, considering this
semiannual a benefit.
Solution:
F = 3,000,000
6. What nominal rate per month is equal to an effective, continuously compounded 1.3
percent per month?