University of Mindanao – Tagum College

Department of Engineering Education

Bachelor of Science in Electrical Engineering
National Highway, Visayan Village, Tagum City

Research Project for Engineering Economy

In partial fulfillment of the final requirements for the subject CEE109 –

Engineering Economics (Class Code: 3758- 9:00am-10:00am)

Xaviery Ralph N. Salido

Christian Piad

March 2023
Rationale

The purpose of this research is to apply the learnings and knowledge about
engineering economy and give emphasis on how is the economy affects the decision
and estimate of a professional (specifically engineers) when it comes to projects. For
the sake of the application, researchers conduct their interview to a pawnshop.
Pawnshop is also a good choice for an interview because it offers a service that
involves the exchange of jewelries and other authentic physical bodies such as gadgets,
to a monetary form of matter that depends to the interest rate offered by the company.
Though pawning has nothing to do with decision making to an engineering projects, but
the analysis of monetary valuation can be accommodated and be able to practice and
gain such experience for the application of general economic status, even in everyday
life applications.

The company and its background

The researchers choose the well-known pawnshop and money remittance center
that has many branches across the whole Island of the Philippines, The Cebuana
Lhuillier pawnshop. Formally established in 1988, the PJ Lhuillier Group of Companies
(PJLGC) is a dynamic, multi-industry company that owns and operates businesses
dealing with financial services such as pawning, remittance, micro insurance, micro
savings, and business to business micro loan solutions. The P.J. Lhuillier, Inc. (PJLI) is
the proud parent company of the Cebuana Lhuillier Pawnshop, one of the leading and
largest non-bank financial services provider in the Philippines with more than 2,500
branches nationwide. PJLI attributes its dominance in the industry to integrity and
heartfelt service, robust network of local and international industry partners, and
steadfast commitment to nurture market-leading businesses for its growing clientele
(www.cebuanalhuillier.com).

The researchers only select the pawning branch of the company due to easy access
from their residency and is open to have a short interview about the service of the
branch.
Narrative Report of the Interview

The Cebuana Lhuillier Pawnshop is located at Corner Rizal – Bonifacio Street,

Magugpo Poblacion, Tagum City, Davao del Norte. The time of interview was on
3:30pm in the afternoon, March 2, 2023. The manager of the branch that allows the
researchers to have the interview was Mr. Bryan (He choose not to say his full name, in
pursuant of the RA 10173, or the Data Privacy Act of 2012). According to Mr. Bryan, the
Cebuana Lhuillier Pawnshop – Tagum Branch, offers only pawning of jewelries and
authentic gadgets. The interest percentage of pawning jewelries is 4% compounded
monthly and 7% compounded monthly as for the gadgets. He added that there are no
discount included in pawning. Later in this report, the researcher will show the effective
rate of the said pawning service. Mr. Bryan added that even it is compounded monthly,
the maximum period for pawned jewelries and gadgets are 4 months only and 1 month
extension for auction. If the pawned jewelries or gadgets were being neglected by the
owner or the owner decided not to redeem the pawned materials and passed after 5
months, the pawned jewelries and gadget will be pulled out and it will be turned-over to
the main branch. Since that there are two separated rate in pawning, the effective rate
of each materials are also separated:

r
Recalling the solutions for effective rate, it is (1+ )mn – 1, where r is the nominal rate of
m
interest, m is the number of compounding periods per year, and the n is the number of
year/s.

For the effective rate of interest for pawning jewelries, we can say that;

r
Ieff. = (1+ )mn – 1 x 100% ; where r = 4% and m = 12 and since the
m
maximum period for pawned materials is less than 1 year, n = 1 year.
 0.04 (12)(1)
= (1+ ) -1 x 100%
12

Ieff. = 4.07% effective interest rate for pawning Jewelries

For the effective rate of interest for pawning gadgets, we can say that;

r
Ieff. = (1+ )mn – 1 x 100% ; where r = 7% and m = 12 and since the
m
maximum period for pawned materials is less than 1 year, n = 1 year.

0.07 (12)(1)
= (1+ ) -1 x 100%
12

Ieff. = 7.23% effective interest rate for pawning Gadgets

Conclusion

The Cebuana Lhuillier Pawnshop – Tagum Branch offers the effective rate of
4.07% for pawning jewelries and 7.23% for pawning authentic gadgets compounded
monthly but the maximum period for pawned items only last for 4 months and has a 1
month extension for auction. According to the manager, there are no discount offered in
the branch.