ENGINEERING ECONOMICS (PROBLEM SOLVING)

1. Today, a businessman borrowed money to be paid in 10 equal payments for 10 quarters. If the interest rate is 10%
compounded monthly and the quarterly payment is P2,000 how much did he borrow? 19, 113.08

2. A student plan to deposit P1,500 in the bank now and another P3,000 for the next 2 years. If he plans to withdraw
P5,000 3 years after his last deposit for the purpose of buying shoes, what will be the amount of money left in the
bank after one year of his withdrawal? Effective annual interest rate is 10%. 1,550

3. If P5,000 shall accumulate for 10 years at 8% compounded quarterly. Find the compounded interest at the end of
10 years. 6,040

4. Ben deposits $5,000 now into an account that earns 7.5% interest compounded quarterly. He then deposits $1,000
at the end of the 1st year and 2,000 on the 2nd year. How much will the account contain 10 years after the initial
deposit? (Round off answer to whole number) 14,006

5. Determine the present worth of an annuity consisting of 6 payments of $12,000 each, the payment is made at the
beginning of each year. Money is worth 15% compounded monthly. $69,814

6. A motorcycle costs P50,000 and has an expected life of 10 years. The salvage value is estimated at P1,000. What
is the appropriate rate of return on the investment if the annual revenue is P10,000? MARR = 10% 12.72% = 13%

7. A small company purchased now for $23,000 will lose $1,200 each year the first four years. An additional $8,000
invested in the company during the fourth year will result in a profit of $5,500 each year from the fifth year through
the fifteenth year. At the end of the 15 years, the company can be sold for $33,000. 10%

8. A newly-built business property, containing a space for a store and two offices, can be purchased for $1,200,000. A
prospective buyer estimates that during the next 10 years he can obtain annual rentals of at least $458,460 from
the property, and the annual out-of-pocket expenditure will not exceed $60,000. He believes that he should be
able to dispose of the property at the end of 10 years at not less than $700,000. Annual taxes and insurance will
total 2.5% of the first cost. Assume he has sufficient capital to purchase the property, and that the minimum
attractive return (MARR) he is obtaining from his capital is 20%. What is the Rate of Return of the Investment (in
%)?

a. How much is the excess of the cash flow using the Annual Worth Method? Round off answer to whole
number. 3,794,600 or 109,199
b. Compute the payback period of the investment. (In two decimal places) 0.98 OT

9. XYZ Corporation manufactures book cases that it sells for P65 each. It costs them P35,000 per year to operate its
plant. This sum includes rent, depreciation charges on equipment and salary payments. If the cost to produce one
bookcase is P50, how many cases must be sold each year for XYZ to avoid taking a loss? 2,334 units

10. Money is to be put into an account in 4 equal deposits at the end of 4 quarters. If the interest is 4% compounded
quarterly, how much will be accumulated if the quarterly deposit is $4,000? $16,242

11. If you borrowed money from your friend with simple interest of 12%, find the present worth of P20,000, which is
due at the end of nine months. $18,348.60

12. A man wishes to provide a fund for his retirement such that from his 60th to 70th birthdays, he will be able to
withdraw equal sums of P18,000 for his yearly expenses. He invests equal amount for his 41st to 59 th birthdays in
a fund earning 10% compounded annually. How much should each of these amounts be? Round off your answer
to whole number. 2285

13. Maria deposits $2,000 in a savings account that pays interest at an annual compound rate of 3%. Two years after
the deposit, the interest rate increases to 4% compounded semi-annually. A second deposit of $3,000 is made
immediately after the interest rate changes to 4%. How much will be in the fund 7 years after the second deposit?
(Round off answer to whole number) 6,758.11

14. The XYZ Company is contemplating the purchase of a new milling machine. The purchase price of the new
machine is P60,000 and its annual operating cost is P2,675.40. The machine has a life of 7 years, and it is
expected to generate P15,000 revenues in each year of its life. Should the company acquire a new milling
machine? The company expects to earn not less than 20%. 4.87 years

15. A bridge with initial cost of P50,000,000 has a life of 20 years. The bridge must be partially re-built at the end of
each 20 years at a cost of P10,000,000. It will have an annual operating cost of P1,000,000 for the first 10 years
 ENGINEERING ECONOMICS (PROBLEM SOLVING)
and P500,000 thereafter. At 6% annual interest; Case I Capitalized Cost - 54,789,158, Case II Capitalized Cost
– 54, 789,158, Case III Capitalized Cost – 54,530,759.50

16. Mr. Robles plans a deposit of P500 at the end of each month for 10 years at 12% annual interest, compounded
monthly. The amount that will be available in two years is: P13,487

17. Determine the present equivalent value of the cash-flow diagram below when the annual interest rate ik varies as
indicated. 1,850

18. An instructor plans to retire in one year and wants an account that will pay him P25,000 a year for the next 15
years. Assuming a 6% annual effective interest rate, what is the amount he would need to deposit now? (The fund
will be depleted after 15 years) P242,806

19. The officers of the International Leather Company is considering building a plant in Metro Manila costing
P2,250,000. At the end of 12 years, the plant can be sold for P500,000. It is estimated that sales will be
P1,000,000 per year and that labor would cost annually P100,000 and overhead would be P55,000. Taxes and
insurance would be 3% of the first cost. If MARR is at least 20%. What is the net present value (NPV) of the
project? P1,257,569
a. What is the ERR of the project? 16%
b. What is the rate of return of the Metro Manila plant project? 32.6%
c. Compute the project’s IRR by PW using 15% and 35% rates? 35.6%

20. A new broiler was installed by a textile plant at a total cost of P300,000 and was projected to have a useful life of
15 years. At the end of its useful life, it is estimated to have a salvage value of P30,000. Determine its capitalized
cost if interest is 18% compounded annually. P324,604

21. A large textile company is trying to decide which sludge dewatering process it should use ahead of its sludge
drying operation. The costs associated with centrifuge and belt press systems are shown below. MARR is set at
15%.
Centrifuge Belt Press
First cost, $ 200,000 170,000
Annual operating cost, $/year 31,000 35,000
Salvage value, $ 40,000 10,000
Life, years 4 4

On the basis of Incremental Analysis, determine IRR using 13% and 18% rates. 13.4%

22. You want to start saving for your 10-year-old son’s college education. If you were guaranteed 6% interest
compounded quarterly, how much would you have to save per month to amount P12,000 by the time he is 18?
P98  P98.31

23. A man expects to receive P25,000 in 8 years. How much is that money worth now considering interest at 8%
compounded quarterly? P13,266

24. Find the net present worth of the following cash flow series at an interest rate of 8%. $4,394
End of Period Cash Flow
0 -$1,000
1 -2,000
2 3,000
3 4,500
4 1,500

25. Maintenance cost of an equipment is P20,000 for 2 years, P40,000 at the end of 4 years and P80,000 at the end
of 8 years. Compute for the semi-annual amount that be set aside for this equipment. Money worth 10%
compounded annually. P7,425

26. An engineering project analyst is contemplating a 3-year project which will require an initial investment for
equipment of $85,000. It is anticipated that, if there is no inflation, annual revenues from the project will be
$60,000 and annual cash expenses will be $25,000. It is estimated that the left-over equipment will have a market
value of $45,000 at the end of three years. Using a MARR of 10%, determine the ERR of the project. 18%
a. The payback period of the project is 1.14 years
b. What is the NPV? 35,849
c. Compute the IRR by Present Worth using 5% and 30%. 29%
 ENGINEERING ECONOMICS (PROBLEM SOLVING)
27. Consider the accompanying cash flow series at varying interest rates. What is the equivalent present worth of the
class flow series? 4,745

28. A computerized wood lathe, costing $17,000 will be used to make ornamental parts for sale. Sales are estimated
at $28,000 per year with costs running $25,000 per year. The salvage value is $2,000 at the end of 10 years. If the
MARR is 8%, what is the present worth of this investment? $4,060

29. An Industrial Engineer wishes to accumulate a total of P10,000 in a savings account at the end of 10 years. If the
bank pays only 4% compounded quarterly, what should be the initial deposit? P6,716.53

30. A manufacturing firm wishes to give each 80 employees a holiday bonus. How much is needed to invest monthly
for a year at 12% nominal interest rate, compounded monthly, so that each employee will receive a P2,000
bonus? P12,616

31. An investment option is available with continuous compounding at 5% interest. If you invest $8,000 now, how
much interest income will you earn if you cash out in 3.5 years? $1,530

32. If you borrow $9,000 and agree to repay the loan in six equal semi-annual payments at an interest rate of 10%
annually, what will the payment be? 1,653.75 or 1,773.16

33. Kathy buys a television set from a merchant who asks P1,250 at the end of 60 days (cash in 60 days). Kathy
wishes to pay immediately and the merchant offers to compute the cash price on the assumption that money is
worth 8% simple interest. What is the cash price today? P1,233.23

34. You loan from a loan firm an amount of P100,000 with a rate of simple interest of 20%, but the interest was
deducted from the loan at the time the money was borrowed. If at the end of one year, you have to pay the full
amount of P100,000, what is the actual rate of interest? 25%

35. What is the corresponding effective interest rate of 18% compounded semi-quarterly? 19.48%

36. The XYZ Company is contemplating the purchase of a new milling machine. The purchase price of the new
machine is P60,000 and its annual operating cost is P2,675.40. The machine has a life of 7 years, and it is
expected to generate P15,000 revenues in each year of its life. Should the company acquire a new milling
machine? The company expects to earn not less than 20%. The Annual Worth Excess is: -4,321

37. A large textile company is trying to decide which sludge dewatering process it should use ahead of its sludge
drying operation. The costs associated with centrifuge and belt press systems are shown below. MARR is set at
15%.
Centrifuge Belt Press
First cost, $ 200,000 170,000
Annual operating cost, $/year 31,000 35,000
Salvage value, $ 40,000 10,000
Life, years 4 4
Using Equivalent Worth Method (Present Worth), the better alternative is CENTRIFUGE amounting to 87,042
BELT PRESS, 269,924.24

38. An independently owned moving company wants to have enough money to purchase a new tractor-trailer in 4
years. If the unit will cost $250,000, how much should the company set aside each year if the account earns 10%
per year? 53,867.80 or 53,868

39. A small company purchased now for $23,000 will lose $1,200 each year the first four years. An additional $8,000
invested in the company during the fourth year will result in a profit of $5,500 each year from the fifth year through
the fifteenth year. At the end of the 15 years, the company can be sold for $33,000. Calculate the ERR when ϵ =
12%. 10.74%
 ENGINEERING ECONOMICS (PROBLEM SOLVING)
a. Determine the IRR = 10%
b. Calculate the FW if MARR = 12% = -27,070

40. How many years will it take to triple your investment of $8,000 if it has an interest rate of 7% compounded
bi-monthly? 15.8 OR 15.9

41. A young woman, 22 years old, has just graduated from college. She accepts a good job and desires to establish
her own retirement fund. At the end of each year thereafter, she plans to deposit $2,000 in a fund at 15% annual
interest. How old will she be when the fund has an accumulated value of $1,000,000? 53

42. John borrowed P50,000 from the bank at 25% compounded semi-annually. What is the equivalent effective rate of
interest? 26.55% or 26.56%

43. A man bought an equipment costing P60,000 payable in 12 quarterly payments, each installment payable at the
beginning of each period. The rate of interest is 24% compounded quarterly. What is the amount of each
payment? 6,751.53

44. Money borrowed today is to be paid in 6 equal payments at the end of 6 quarters. If the interest is 12%
compounded quarterly, how much was initially borrowed if a quarterly payment is P2,000? 10,834

45. A proposed project is estimated to have the following cash flow, at 7% MARR: What is the Net Present Value of
the project? (Round off answer to whole number) 3,885; 745.83 at 9% or 1,711.22

46. Mr. Ramirez borrowed P15,000 two years ago. The terms of the loan are 10% interest for 10 years with uniform
payments. He just made his second annual payment. How much principal does he still owe? P13,024

47. General Electric Company which manufactures electric motor has a capacity of producing 150 motors a month.
The variable costs are P4,000 per month, the average selling price of the motor is P750 per motor. Fixed costs of
the company amount to P78,000 per month which includes all taxes. Determine the number of motors to be
produced per month to break even. 110 UNITS

48. By the condition of a will, the sum of P2,000 is left to a girl to be held in trust fund by her guardian until it amounts
to P50,000. When will the girl receive the money if the fund is invested at 8% compounded quarterly? 11.57 years

49. In the design of a special-use structure, two mutually exclusive alternatives are under consideration:
D1 D2
Capital Investment $50,000 $70,000
Annual Expenses $9,000 $5,000
Salvage Value $10,000 $20,000
Useful Life (years) 20 20
The Firm’s MARR is 10%. On the basis of Incremental Analysis, determine IRR using 5% and 25% rates. 23%

50. Compute the equivalent rate of 6% compounded semi-annually to a rate compounded quarterly. 5.96%

51. You are considering a new punch press machine. This machine will have an estimated service life of 10 years.
The expected salvage value at the end of service life will be 10% of the purchase cost. Its annual operating cash
flows are estimated to be $60,000. If you can purchase the machine at $308,758 and MARR is set at 10%, what is
the expected rate of return (ROR) on this investment? 13.8% or 15%

52. A fully secured loan of P30,000 was to be amortized by 10 equal semi-annual payments, the first payment to be
made 6 months after the loan finalization. After the 6th payment was made the debtor was in a position to settle the
entire debt balance by a single payment on that date. If the interest on the loan is 12% compounded semi-
annually, what be the amount of the single payment? P16,935
 ENGINEERING ECONOMICS (PROBLEM SOLVING)
53. The amount P50, 000 was deposit in the bank earning an interest of 7.5% per annum. Determine the total amount
at the end of 5 years, if the principal and interest were not withdrawn during the period? P71,782

54. A loan of $2,000 is made for a period of 13 months, from January 1 to January 31 the following year, at a simple
interest rate of 20%. What future amount is due at the end of the loan period? Round off your answer to whole
number. 2,433

55. What is the annual rate of interest if $265 is earned in four months on an investment of $15,000? Write your
answer in % with 1 decimal value. 5.3

56. How much money must be invested on Jan. 1, 1998 in order to accumulate P2,000 on Jan. 1, 2003. Money is
worth 6%. P1,494.52

57. A contract has been signed to lease a building at P200,000 per year with annual increase of P1,500 for 8 years.
Payments are to be made at the end of each year, starting one year from now. The prevailing interest rate is 7%.
What lump sum paid today would be equivalent to the 8-year lease-payment plan? Round off your answer to
whole number. 1,222,443; 5,150.49

58. A manufacturer produces certain items at a labor cost per unit of P315, material cost per unit of P100, variable
cost of P3.00 each. If the item has a selling price of P995, how many units must be manufactured each month for
the manufacturer to break even if the monthly overhead is P461,600? 800 UNITS

59. If $25,000 is deposited now into a savings account that earns 6% per year, what uniform annual amount could be
withdrawn at the end of each year for 10 years so that nothing would be left in the account after the 10 th
withdrawal? 3,396.70 or 3,204.43 if formula for annuity due is used

60. A telephone switchboard 100 pair cable can be made up with either enameled wire or tinned wire. There will be
400 soldered connections. The cost for soldering a connection on the enameled wire will be P1.65, on the tinned
wire it will be P1.15. A 100-pair cable made up with enameled wire cost P0.55 per lineal foot and those made up
of tinned wire cost P0.75 per lineal foot. Determine the length of cable run in ft. so that the cost of each installation
would be the same. 100 ft. (Chegg/OT), 515 ft. or 505 ft.

61. The plan was to leave $5,000 on deposit in a savings account for 15 years at 6.5% interest compounded annually.
It became necessary to withdraw $1,500 at the end of the 5th year. How much will be on deposit at the end of the
15-year period? (Round off answer to whole number) 10,043

62. What is the Net Present Value of the project? (Round off answer to whole number) 754.83 or 746

63. What is the present worth of a 3 years annuity paying P3,000 at the end of each year, with interest at 8%
compounded annually? P7,731

64. You need P4,000 per year for four years to go to college. Your father invested P5,000 in 7% account for your
education when you were born. If you withdraw P4,000 at the end of your 17 th, 18th, 19th, and 20th birthday, how
much money will be left in the account at the end of the 21st year? P1,700

65. If $10,000 is deposited each year for 9 years, how much annuity can a person get annually from the bank every
year for 8 years starting 1 year after the 9th deposit is made? Interest is 14%. $34,675

66. Money borrowed today is to be paid in 6 equal quarters. If the interest is 12% compounded quarterly, how much
was initially borrowed if a quarterly payment is P2,000? 100,834

67. A man borrowed money from a loan shark. He receives from the loan shark an amount of $1,342 and promised to
repay $1,500 at the end of 3 quarters. What is the simple interest rate? 15.69%
 ENGINEERING ECONOMICS (PROBLEM SOLVING)

68. What is the future worth in year 10 of $5,000 at n = 0, $10,000 at n = 3 years, and $8,000 at n = 5 years if the
interest rate is 12% per year? $51,735

69. What is the accumulated amount after 5 years of P2,000 invested at the rate of 10% per year compounded bi-
monthly? 3,284

70. You invested $100,000 in a project and received $40,000 at n = 1, $40,000 at n = 2, and $30,000 at n = 3 years.
You need to terminate the project at the end of year3. Your interest is 10%; what is the project balance at the time
of termination? Loss of $10,700

71. A student plan to deposit P1,500 in the bank now and another P3,000 for the next 2 years. If he plans to withdraw
P5,000 3 years after his last deposit for the purpose of buying shoes, what will be the amount of money left in the
bank after one year of his withdrawal? The effective annual interest rate is 10%. P1,550

72. What uniform annual amount should be deposited each year in order to accumulate P100,000 at the end of the 5th
annual deposit if money earns 10% interest? 16,379.75

73. How much money must you invest today in order to withdraw P2,000 annually for 10 years if the interest rate is
9%? P12,835

74. The first cost of a certain equipment is P324,000 and a salvage value of P50,000 at the end of its life of 4 years. If
money is worth 6% compounded annually, find the capitalized cost. P1,189,758

75. You deposit $4,000 today, $5,000 one year from now, and $7,000 three years from now. How much money will
you have at the end of year three if there are different annual compound interest rates per period of 4%, 8%, and
12% respectively? $18,171.46 or $17,331.456

76. You are considering buying a CNC Machine. This machine will have an estimated service life of 10 years with a
savage value of 5% of the investment cost. its annual net revenues are estimated to be $40,000. To expect a 15%
minimum attractive rate of return, what would be the maximum amount that you are willing to pay for the machine?
$203,240

77. Tom's retirement account in a company currently totals $416,384. What perpetual income can Tom and his heirs
receive per year if he retires now and the money is invested in an annuity earning 6% interest? $24,980

78. An item is purchased for P100,000. Annual cost is P18,000. Using an interest rate of 8%, what is the capitalized
cost of perpetual service? P325,000

79. A man purchased on monthly installment a P100,000 worth of land. The interest rate is 12% nominal and payable
in 20 years. What is the monthly amortization? P1,101.08

80. If A = P5,000, G = P400, and n = 6, then i = 15%; PA =? 12,875 or 10,275

81. Compute for the IRR using incremental analysis for a company who is going to buy a new machine for
manufacturing its product. Two machines are available. MARR is 20%. Cost, operating and other expenses are as
follows: 44%

Machine Machine B
A
First Cost P24,000 P30,000
N 1,300 1,360
Labor per year 11,600 9,320
Maintenance per year 2,800 1,900
Taxes and insurance 3% 3%
Life, years 5 5

https://www.youtube.com/watch?v=bH0XqTdVhiI

82. A loan of $3,000 was made at 9% simple interest. How long would it take in years for the amount of the loan and
interest to equal $4,290? 4.8 years

83. Find the present value, in pesos, of a perpetuity of P15,000 payable semi-annually if money is worth 8%
compounded quarterly. P371,287.13
 ENGINEERING ECONOMICS (PROBLEM SOLVING)
84. The amount of P12,800 in 4 years at 5% compounded quarterly is ____________. 15,614.59

85. The maintenance cost for an investment is $2,000 per year for the first 10 years and $1,000 per year thereafter.
The investment has infinite life. With a 10% interest rate, the present worth of the annual disbursement is most
nearly 16,000

86. A person deposit $6000 per year into a retirement account which pays interest at 8% per year. The amount of
money in the account at the end of 30 years is $679,699

87. Recent technology has made possible a computerized vending machine that can grind coffee beans and brew
fresh coffee on demand. The computer also makes possible such complicated functions as tracking the age of an
item and then moving the oldest stock to the front of the line, thus cutting down on spoilage. Easy Snack Inc. has
estimated the cash flows in thousands of dollars over the products’ six-year useful life, including the initial
investment, as follows:

n Net Cash Flow

0 $200,000
1 80,000
2 180,000
3 180,000
4 180,000
5 100,000
6 30,000
Using 20% and 65% annual interest rates, what is the IRR for this investment? 61.7%
Compute for the ERR if MARR is 18%. 13%

88. How long will it take money to double if invested at 5% compounded-annually? 14 years

89. An engineering project analyst is contemplating a 3-year project which will require an initial investment for
equipment of $85,000. It is anticipated that, if there is no inflation, annual revenues from the project will be
$60,000 and annual cash expenses will be $25,000. It is estimated that the left-over equipment will have a market
value of $45,000 at the end of three years. Using a MARR of 10%, Compute the IRR by PW of the project using
5% and 30% rates. 30%

90. In 1739, Gregory Smith sold the Kohinoor diamond to Queen Victoria for $34. If he saved just $5 from the
proceeds in a bank account that paid a 6% annual interest, how much would the descendants have in 2020?
$64,553,255

91. At a certain interest rate compounded semi-annually, $5,000 will amount to $20,000 after 10 years. What is the
amount at the end of 15 years? Round off your answer to whole number. $39,996.12

92. A company must relocate one of its factories in 3 years. Equipment for the loading dock is being considered for
purchase. The original cost is P20,000 the salvage value of the equipment after three years is P8,000. The
company’s rate of return (i) on money is 10%. Determine the capital recovery rate per year. P5,625

93. A man may take $50000 cash or 10 equal monthly payments on a life insurance policy, where the first payment is
to be made immediately. What is the monthly payment if money is worth 3% compounded monthly? $5069.07

94. You purchased a building five years ago for $100,000. Its annual maintenance expense has been $5,000 per year.
At the end of five years, you sold the building for $80,000. During the period of ownership, you rented out the
building for $10,000 per year at the beginning of each year. Evaluate this investment when MARR is 8% per year.
The payback period is 4

95. A sum P1,000 is invested now and left for eight years, at which time the principal is withdrawn. The interest has
accrued and is left for another eight years. If the effective annual interest rate is 5%, what will be the withdrawal
amount at the end of 16th year? 705.42

96. A loan of P5,000 is made for a period of 15 months at a simple interest rate of 15%. What future amount is due at
the end of the loan period? 5937.50

97. An item is purchased for P100,000. Annual cost is P18,000. Using an interest rate of 8%, what is the capitalized
cost of perpetual service? 325,000

98. The will of a wealthy philanthropist left $5,000,000 to establish a perpetual charitable foundation. The foundation
trustees decided to spend $1,200,000 to provide facilities immediately and to provide $100,000 of capital
 ENGINEERING ECONOMICS (PROBLEM SOLVING)
replacement at the end of each 5-year period. If the invested funds earned 12% per annum, what would be the
year end amount available in perpetuity from the endowment for charitable purposes? Round off your answer to
whole number. 440,259

99. A loan of $10,000 is made today at an interest rate of 15% and the first payment of $3,000 is made 4 years later.
The amount that is still due on the loan after the first payment is most nearly 14,500

100. A manufacturing firm maintains one product assembly line to produce signal generators. Weekly demand for the
generators is 35 units. The line operates for 7 hours per day, 5 days per week. What is the maximum production
time per unit in hours required of the line to meet the demand? 1 hour

101. A P4,000 is borrowed for 75 days at 16% per annum simple interest. How much will be due at the end of 75
days? 4,133.33

102. An engineering project analyst is contemplating a 3-year project which will require an initial investment for
equipment of $85,000. It is anticipated that, if there is no inflation, annual revenues from the project will be
$60,000 and annual cash expenses will be $25,000. It is estimated that the left-over equipment will have a market
value of $45,000 at the end of three years. Using a MARR of 10%, determine the ERR of the project. - 18%

103. If you want to withdraw $20,000 at the end of two years and $55,000 at the end of four years, how much should
you deposit now into an account that pays 12% compounded semi-annually? 50,350 or 50,349.55

104. You are considering investing in a 5-yr CD (certificate of deposit) with an annual yield of 6.5% and monthly
compounding. If you invest $5,000, your effective interest earned is most nearly: 6.7%

105. You are considering buying a CNC machine. This machine will have an estimated service life of 10 years with a
salvage value of 5% of the investment cost. Its annual net revenues are estimated to be $40,000. To expect a
15% rate of return on investment, what would be the maximum amount that you are willing to pay for the
machine? $203, 240.17

106. Mr. James Louvay owes $25,000 due at the end of 1 year and $75,000 due at the end of 4 years. He agrees to
pay $50,000 today and the balance in two years. How much must he pay at the end of two years if money is worth
5% compounded semi-annually? $39,090

107. A man paid 10% down payment of P200,000 for a house and lot and agreed to pay the 90% balance on monthly
installments for 60 months at an interest rate of 15% compounded monthly. Compute the amount of the monthly
payment. P42,822

108. What is the accumulated amount of the five-year annuity paying P6,000 at the end of each year, with interest at
15% compounded annually? P40,454.29

109. You need P4,000 per year for four years to go to college. Your father invested P5,000 in 7% account for your
education when you were born. If you withdraw P4,000 at the end of your 17th, 18th, 19th and 20 th birthday, how
much money will be left in the account at the end of the 21st year? 1,700

110. Recent technology has made possible a computerized vending machine that can grind coffee beans and brew
fresh coffee on demand. The computer also makes possible such complicated functions as tracking the age of an
item and then moving the oldest stock to the front of the line, thus cutting down on spoilage. Easy Snack Inc. has
estimated the cash flows in thousands of dollars over the products’ six-year useful life, including the initial
investment, as follows:
n Net Cash Flow
0 $200,000
1 80,000
2 180,000
3 180,000
4 180,000
5 100,000
6 30,000

Compute for the ERR if MARR is 18%. 35%

111. You are considering buying an old warehouse that you will convert into an office building for rental. Assuming
that you will own the property for 10 years, how much would you be willing to pay for the old house now given the
following financial data? - $5,311,865
 ENGINEERING ECONOMICS (PROBLEM SOLVING)
Remodeling cost at period 0 = $550,000
Annual rental income = $800,000
Annual upkeep costs = $80,000
Estimated net property value at the end of 10 years = $2,225,000
The time value of your money (interest rate) = 8% per year

112. Clark and Leah owes $25,000 due at the end of one year and another $25,000 due at the end of 5 years. They
agree to pay $35,000 on the 2nd year and the remaining balance a year after their first payment. How much must
they pay for their second payment if money is worth 5% compounded semi-annually? - $13,472 [answer key
from course hero pero no sol]

113. Find the exact leap year interest amount due if P3,000,000 was invested at 12.5% for the period from May 20 to
Aug 8 81,967

114. A nominal interest of 3% compounded continuously is given on the account. What is the accumulated amount of
P10,000 after 10 years? - P13,499

115. A merchant puts in his P2,000 to a small business for a period of six years. With a given interest rate on the
investment of 15% per year, compounded annually, how much will he collect at the end of the sixth year? -
P4,626

116. Find the present worth of a future payment of P100,000 to be made in 10 years with an interest of 12%
compounded quarterly. - P30,655.68

117. Tony invested P15,000 in a high yield account. At the end of 30 years, he closed the account and received
P539,250. Compute the effective interest rate he received on the account. 12.68%

118. P1,500 was deposited in a bank account, 20 years ago. Today it is worth P3,000. Interest is paid semiannually.
Determine the interest rate paid on this account. 3.5%

119. Mr. Jones plans a deposit of P500 at the end of each month for 10 years at 12% interest compounded monthly.
What will be the amount in two years? 13,486.73

120. A bank charges 12% simple interest on a P300 loan. How much will be repaid if the loan is paid back in one lump
sum after three years? 408

121. A $20,000 loan was originally made at 8% simple interest for 4 years. At the end of this period the loan was
extended for 3 years with the new interest rate at 10% compounded quarterly. How much should the borrower pay
at the end of 7 years? $35,505

122. I am setting up a fund for my son to go to college. I figure that he will need $50,000 by the time he is old enough
to go to college. I found an account that pays 5.75% compounded monthly. How much will my monthly payment
be to get my son set up for college in 17 years? $145.06

How much interest will the account accrue? 20,407.76

123. If money is worth 16%, m = 2 find the single payment which would replace the following obligations at the end of
3 years, if $25,000 due at the end of 2 years and P15,000 due at the end of 2 ½ years. $45,360