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ESci131n
Engineering Economy
Assignment 4
Coverage: Compound Interest
Deadline: 6pm, Sunday, 25 April 2021

Class Number 12
Class Schedule 3 – 4:30 MW

Solve the following problems. Present a complete and comprehensive solution following
the traditional format (given, required and solution) using the required units.
Solutions/final answers not using the correct units will not earn points. Truncated or
“short-cut” solutions will not be accepted. Construct the correct cash flow diagram for
every problem. Round off your final answer to two (2) decimal places. Enclose your final
answer with a rectangle otherwise it will not be credited.

1. A company expects to retire an existing machine at the end of 2023 and will replace it with a
new one that will cost P60,000. The old machine is expected to be sold for P5,000 after being
replaced. To be able to raise funds for the new machine, the company intends to deposit the
following amounts in an account at 8% compounded quarterly:
P20,000 at the end of 2020
P15,000 at the end of 2021
P10,000 at the end of 2022
What additional amount is needed by the company at the end of 2023 to purchase the new
machine? (3pts)
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2. At what interest rate compounded semi-annually will P1,000 become P4,500 in fifteen years?
How much will it be at the end of ten years? (3pts)
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