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ENGINEERING ECONOMY

ASSIGNMENT NO. 2

1. Find a cash price of a generator which was bought in installment basis that
requires a down payment of P50,000.00 and payment of P30,000.00 after 1
year, P40,000.00 after 2 years and a final payment of P76,374.34 after 4
years at a rate of 15% per annum.

X = 50K + 30K(1 + .15)−1 + 40K(1 + .15)−2 + 76,374.34(1 + .15)−4

X = 15,000P

2. A man made a loan of P100,000.00 at a rate of 15% per annum and promise
to pay it according to the following manner, P30,000.00 at the end of 1st
year, unknown payment at the end of 2nd year and a final payment of
P76,374.38 at the end of 4th year. Find the unknown payment made by the
man.

100K = 30K(1 + .15)−1 + X(1 + .15)−2 + 76,374.38(1 + .15)−4

X = 40,000P

3. Find the present worth of the following payments, P5,000.00 after 1 year,
P4,000.00 after 2 years, P8,000.00 after 4 years at a rate of 12% per annum.

P = 5K(1 + .12)−1 + 4K(1 + .12)−2 + 8K(1 + .12)−4

P = 12,737.21P

4. A bank is advertising 9.5% accounts that yield 9.84% annually. How often
is the interest compounded?

Quarterly
 5. A man borrows P2,000.00 for 6 years at 8%. At the end of 6 years, he renews
the loan for the amount due plus P2,000.00 more for two years at 8%. What is
the lump sum due?

F = 2000(1 + .08)6 + 2000(1 + .12)2

F =6,034.66P or 6,035P

6. What present sum is equivalent to a series of P1,000 annual end-of-year

payments, if a total of 20 payments are made and interest is 12%

P = A(1 – (1 + i)𝑛 /i)

P = 1K(1 - (1 + .12)−20/.12)

P = 7,469.44P

7. A man made ten annual-end-of-year purchases of P1,000 common stock. At the

end of 10th year he sold all the stock for P12,000. What interest rate did he obtain
on his investment?

F = A((1 + i)𝑛 − 1/𝑖)

12K = 1K(1 + i)10 − 1/𝑖)

I = 0.04 or 4%

8. A condominium unit can be bought at a downpayment of P150,000 and a

monthly payment of P10,000 for 10 years starting at the end of 5th year from the
date of purchase. If money is worth 12% compounded monthly, what is the cash
price of the condominium unit?

P = 150,000 + PA

PA = A(1 + i)−121 − 1/0.01)(1 + 0.01)−59

PA = 389,170.75

P = 150,000 + 389.171

P = 539,171P
9. A wealthy man donated a certain amount of money to provide scholarship grants
to deserving students. The fund will grant P10,000 per year for the first 10 years
and P20,000 per year on the years thereafter. The scholarship grants started one
year after the money was donated. How much was donated by the man if the fund
earns 12% interest.

P= P1 + P2

P1[(1 + i)n–1/ i]

P1[(1 + 0.12)-10–1/ 0.12]

P1 = 56,502.2303

P2= A2/i(1 + i)-n

P2= 20,000/0.12(1 + 0.12)-10

P2 = 53,662.2061

P = 56,502.2303 + 53,662.2061

P = 110,165P

10. A company rent a building for P50,000 per month for a period of 10 years.
Find the accumulated amount of the rentals if the rental for each month is being
paid at the start of each month and money is worth 12% compounded monthly.

F = A [[(1+i)^(n)(n1)+1-1/i]-1]
F = 50,000[[(1 + 0.01)121 - 1/0.01]-1]
F = 11,616,953.817597P
F = 11,616,953.82P