ESC 54/ES 54

QUIZ NO. 1
November 16, 2009

NAME: _________________________________
SCORE: ______________________

Answer the following problems neatly. (20 points each problem)

1. If you borrow money from your friend with simple interest of 12 %, find the
present worth of P20,000.00, which is due at the end of nine months.

2. Suppose a $100 lump-sum amount is invested for 10 years at 6 % compounded

quarterly. How much it is worth at the end of the tenth year? What is the effective
interest rate?

3. A man wishes his son to receive P200,000.00 ten years from now. What amount
should he invest if it will earn interest of 10 % compounded annually during the
first five years and 12 % compounded quarterly during the next five years.

4. At a certain interest rate compounded semiannually, P5,000 will amount to

P20,000 after 10 years. What is the amount at the end of 15 years?

5. A loan of P2,000 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?
 ESC 54 / ES 54
QUIZ NO. 2
January 6, 2009

NAME: _____________________________________
SCORE: _____________

1. What lump sum of money must be deposited into a bank account at the present
time so that P 5,000.00 per month can be withdrawn for five years, with the first
withdrawal scheduled for six years from today? The interest rate is 1% per month.
(Hint: Monthly withdrawals begin at the end of month 72.) (25 points)
2. Find the uniform annual amount that is equivalent to a gradient series in which the
first year’s payment is P 5,000.00, the second year’s payment is P 6,000.00, the
third payment is P 7,000.00, and so on, and there are a total of 10 payments. The
annual interest rate is 8%. (20 points)
3. You are the manager of a large crude oil refinery. As part of the refining process,
a certain heat exchanger (operated at high temperatures and with abrasive material
flowing through it) must be replaced every year. The replacement and downtime
cost in the first year is P 75,000. It is expected to increase due to inflation at a rate
of 8% per year for five years, at which time this particular heat exchanger will no
longer be needed. If the company’s cost of capital is 18% per year, how much
could you afford to spend for a higher-quality heat exchanger so that these annual
replacement and downtime costs could be eliminated? (25 points)
4. A plastic manufacturing company is intending to expand its product facilities
starting 1988. The program requires the following estimates expenditures:
P1,000,000 at the end of 1988
P1,200,000 at the end of 1990
P1,500,000 at the end of 1993
To accumulate the required funds, it established a sinking fund constituting of 15
uniform annual deposits, the first deposit having been made at the end of 1979. The
interest rate of fund is 12% per annum. (30 points)
1. Calculate the annual deposit
2. What will be the balance in the fund at the end of 1989?
 ESC 54- A/ES 54-A
QUIZ NO. 3
February 10, 2009

NAME: _________________________________
SCORE: ______________

Problem:

A new electric saw for cutting lumber in a furniture manufacturing plant has an
installed cost, or basis, of P140,000.00 and a 10 year estimated life. It was placed in
service on January 1, 1987. The permissible salvage value of the saw is zero at the
end of 10 years. What will be the a.) cumulative depreciation cost through the 6 th
year; b.) depreciation cost during the 6th year; c.) book value at the end of the 6th year.

Use :

a) Straight line method

b) Double declining method
c) Double declining method with switchover to straight line method
d) Sum of the year’s digit method
e) Sinking fund method if i = 8% compounded annually
f) Service output method; suppose that it will be used for a total of 10,000 hours
over a period of 10 years. In the sixth year of operation, the estimated usage is
800 hours and the cumulative usage by the end of year six is 6,400 hours.
 ESC 54/ES 54- A
FINAL EXAM
March 10, 2009

NAME: __________________________
SCORE: ____________

1. Suppose that the parents of a young child decide to make annual payments into a
saving account, with the first payment being made on the child’s fifth birthday
and the last payment being made on the fifteenth birthday. Then starting on the
child’s eighteenth birthday, the withdrawals shown below will be made. If the
effective annual interest rate is 10% during this period of time, what is the amount
of the annuity in years 5 through 15?
3,200
2,800
2,400
2,000
5th Birthday
6 7 8 9 10 11 12 13 14 15

16 17 18 19 20 21

2. An engineering firm purchased 4 years ago a heavy planner for P120,000. The life
of the planner is 5 years, now the firm wishes to replaced the old planner with a
new model planner possessing several advantages. The new machine will cost
P150,000. How much new capital needed to make the purchase? (Use straight-
line method and double declining balance method).
3. A fixed cost associated with the production of a product is P500,000 per year.
Also, assume that the variable cost is P20,000 and selling price is P30,000 for
each percentage point of annual output capacity (and assume sales demand). The
maximum sales per year are P3,000,000.00 (at 100% of output capacity).
Determine the break-even point for this situation.
4. A company has a production capacity of 500 units per month and its fixed costs
are P250,000 a month. The variable costs per unit are P1,150 and each unit can be
sold for P2,000. Economy measures are instituted to reduce the fixed costs by
10% and the variable costs by 20%. Determine the old and new break-even
points. What are the old and new profit at 100% capacity?
 ESC 54/ES 54
REMOVAL EXAM
March 17, 2010

NAME: _____________________________

1. Juan Reyes inherited P280,000 on his birthday. This he placed in his own pension
fund (bank account), which earns interest at 12% compounded annually. He
withdraw P450,000 on his 35th birthday to make the initial payment on a house.
He drew his annual uniform payment for the pension fund on his 65th birthday and
planned to make 20 such withdrawals so as to just exhaust the fund. He died at the
age of 71, however, just before withdrawing the amount due on that date. How
much is left in the fund to be passed on to the heirs at the time of Juan’s death?
2. 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 P2,000 in a fund at 15% annual interest. How old
will she be when the fund has an accumulated value of P1,000,000?
3. A machine shop purchased 10 years ago a milling machine for P60,000. A
straight-line depreciation reserve had been provided on a 20 year life of the
machine. The owner of the machine shop desires to replace the old milling
machine with a modern unit of many advantages costing P100,000. It can sell the
old unit for P20,000. How much new capital will be required for the purchase?
4. A small shop in Bulacan fabricates portable threshers for palay producers in the
locality. The shop can produce each thresher at a labor cost of P1,800. The cost of
materials for each unit is P2,500. The variable costs amount to P650 per unit,
while fixed charges incurred per annum totals P69,000. If the portable threshers
are sold at P7,800 per unit, how many units must be produced and sold per annum
to break-even? Support your answer with computations and by graphical solution.
 ESC 54-A / ES 54-A
QUIZ NO. 2
December 9, 2009

NAME: _____________________________________
SCORE: _____________

1. What lump sum of money must be deposited into a bank account at the present
time so that P 5,000.00 per month can be withdrawn for five years, with the first
withdrawal scheduled for six years from today? The interest rate is 1% per month.
(Hint: Monthly withdrawals begin at the end of month 72.) (20 points)
2. Today, you invest P100,000 into a fund that pays 25% interest compounded
annually. Three years later, you borrow P50,000 from a bank at 20% annual
interest and invest in the fund. Two years later, you withdraw enough money from
the fund to repay the bank loan and all interest due on it. Three years from this
withdrawal you start taking P20,000 per year out of the fund. After five
withdrawals, you withdraw the balance in the fund. How much was withdrawn?
(20 points)
3. On the day his grandson was born, a man deposited to a trust company a sufficient
amount of money so that the boy could receive five annual payments of P10,000
each for his college tuition fees, starting with his 18th birthday. Interest at the rate
of 12% per annum was to be paid on all amounts on deposit. There was also a
provision that the grandson could elect to withdraw no annual payments and
receive a single lump amount on his 25th birthday. The grandson chose this option.
(30 points)
a.) How much did the boy receive as a single payment?
b.) How much did the father deposit?
4. A plastic manufacturing company is intending to expand its product facilities
starting 1988. The program requires the following estimates expenditures:
P1,000,000 at the end of 1988
P1,200,000 at the end of 1990
P1,500,000 at the end of 1993
To accumulate the required funds, it established a sinking fund constituting of 15
uniform annual deposits, the first deposit having been made at the end of 1979. The
interest rate of fund is 12% per annum. (30 points)
a. Calculate the annual deposit
b. What will be the balance in the fund at the end of 1989?
 ESC 54 – A / ES 54 – A
QUIZ NO. 3
January 8, 2009

NAME: _____________________________
SCORE: ____________

(20 points each item)

1. Find the uniform annual amount that is equivalent to a gradient series in which the
first year’s payment is P5,000.00, the second year’s payment is P 6,000.00, the
third payment is P 7,000.00, and so on, and there is a total of 10 payments. The
annual interest rate is 8%.
2. You are the manager of a large crude oil refinery. As part of the refining process,
a certain heat exchanger (operated at high temperatures and with abrasive material
flowing through it) must be replaced every year. The replacement and downtime
cost in the first year is P 75,000. It is expected to increase due to inflation at a rate
of 8% per year for five years, at which time this particular heat exchanger will no
longer be needed. If the company’s cost of capital is 18% per year, how much
could you afford to spend for a higher-quality heat exchanger so that these annual
replacement and downtime costs could be eliminated?
3. A loan was to be amortized by a group of four end-of-year payments forming an
ascending arithmetic progression. The initial payment was to be P5,000 and the
difference between successive payments was to be P400. But the loan was
renegotiated to provide for the payment of equal rather than uniformly varying
sums. If the interest rate of the loan was 15%, what was the annual payment?
4. Find the equivalent annual payment of the following obligations at 20% interest.
End of Year Payment
1 P 8,000
2 7,000
3 6,000
4 5,000
5. In preparing an economic analysis for a new high-rise building, Fayram and
Reynolds, Architects and Engineers, estimated that revenues would be $10
million for the first year of operation of the building and would increase at a rate
of 8% per year thereafter. The time horizon of the analysis was 10 years. The
opportunity cost of capital was set at 12%. Taxes and inflation were ignored for
this first approximation. What was the present worth of the revenues over the time
horizon chosen?
 ESC 54/ES 54- A
FINAL EXAM
March 10, 2010

NAME: __________________________
SCORE: ____________

1. Suppose that the parents of a young child decide to make annual payments into a
saving account, with the first payment being made on the child’s fifth birthday
and the last payment being made on the fifteenth birthday. Then starting on the
child’s eighteenth birthday, the withdrawals shown below will be made. If the
effective annual interest rate is 10% during this period of time, what is the amount
of the annuity in years 5 through 15?
3,200
2,800
2,400
2,000
5th Birthday
6 7 8 9 10 11 12 13 14 15

16 17 18 19 20 21

2. An engineering firm purchased 4 years ago a heavy planner for P120,000. The life
of the planner is 5 years, now the firm wishes to replaced the old planner with a
new model planner possessing several advantages. The new machine will cost
P150,000. How much new capital needed to make the purchase? (Use straight-
line method and double declining balance method).
3. A fixed cost associated with the production of a product is P500,000 per year.
Also, assume that the variable cost is P20,000 and selling price is P30,000 for
each percentage point of annual output capacity (and assume sales demand). The
maximum sales per year are P3,000,000.00 (at 100% of output capacity).
Determine the break-even point for this situation.
4. A food manufacturing plant has waste product that is now being dumped into a
river. The industrial waste material could be processed to produce to either
fertilized or a remixed waste to digest the organic material to produce methane,
carbon dioxide and bacteria cells. This would require the investment of P32,000
in equipment and P5,300 a month for other materials. Labor could cost P1,400 per
month. Overhead expenses will cost P 5,600 per year. Taxes and insurance
amount to 3% of the first cost of the equipment per year. Payroll, taxes and other
benefits amount to 4%. The life of equipment is 5 years with no salvage value at
the end of its life. Money is worth 20% to the company. If 3,000 kg of fertilizers
are produced per month, which can be sold for P2.20 per kg, should the firm make
the investment?
 ESC 54/ES 54
QUIZ NO. 1
November 16, 2010

NAME: _________________________________
SCORE: ______________________

Answer the following problems neatly. (20 points each problem)

1. If you borrow money from your friend with simple interest of 12 %, find the
present worth of P20,000.00, which is due at the end of nine months.

2. Suppose a $100 lump-sum amount is invested for 10 years at 6 % compounded

quarterly. How much it is worth at the end of the tenth year? What is the effective
interest rate?

3. A man wishes his son to receive P200,000.00 ten years from now. What amount
should he invest if it will earn interest of 10 % compounded annually during the
first five years and 12 % compounded quarterly during the next five years.

4. At a certain interest rate compounded semiannually, P5,000 will amount to

P20,000 after 10 years. What is the amount at the end of 15 years?

5. A loan of P2,000 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?
 ESC 54-A / ES 54-A
QUIZ NO. 2
January 10, 2011

NAME: _____________________________________
SCORE: _____________

1. What lump sum of money must be deposited into a bank account at the
present time so that P 5,000.00 per month can be withdrawn for five years,
with the first withdrawal scheduled for six years from today? The interest rate
is 1% per month. (Hint: Monthly withdrawals begin at the end of month 72.)
(20 points)
2. A man purchase a computer system worth P15,000 with interest at 5%
payable semi-annually. He signed a contract to pay P5,000 cash and to
discharge the balance, principal and interest included by equal payments at the
end of each 6 months for 10 years. At the end of four years, this contract was
sold to yield the investor 7% payable semi-annually. Find the price he paid.
(20 points)
3. On the day his grandson was born, a man deposited to a trust company a
sufficient amount of money so that the boy could receive five annual
payments of P10,000 each for his college tuition fees, starting with his 18th
birthday. Interest at the rate of 12% per annum was to be paid on all amounts
on deposit. There was also a provision that the grandson could elect to
withdraw no annual payments and receive a single lump amount on his 25th
birthday. The grandson chose this option. (30 points)
a. How much did the boy receive as a single payment?
b. How much did the father deposit?
4. A plastic manufacturing company is intending to expand its product facilities
starting 1988. The program requires the following estimates expenditures:
P1,000,000 at the end of 1988
P1,200,000 at the end of 1990
P1,500,000 at the end of 1993
To accumulate the required funds, it established a sinking fund constituting of
15 uniform annual deposits, the first deposit having been made at the end of
1979. The interest rate of fund is 12% per annum. (30 points)
a. Calculate the annual deposit
b. What will be the balance in the fund at the end of 1989?
 ESC 54- A/ES 54-A
QUIZ NO. 3
February 11, 2011

NAME: _________________________________
SCORE: ______________

Problem:

A new electric saw for cutting lumber in a furniture manufacturing plant has an
installed cost, or basis, of P140,000.00 and a 10 year estimated life. It was placed in
service on January 1, 1987. The permissible salvage value of the saw is zero at the
end of 10 years. What will be the a.) cumulative depreciation cost through the 6 th
year; b.) depreciation cost during the 6th year; c.) book value at the end of the 6th year.

Use :

a. Straight line method

b. Double declining method
c. Double declining method with switchover to straight line method
d. Sum of the year’s digit method
e. Sinking fund method if i = 8% compounded annually
f. Service output method; suppose that it will be used for a total of 10,000 hours
over a period of 10 years. In the sixth year of operation, the estimated usage is
800 hours and the cumulative usage by the end of year six is 6,400 hours.
 ESC 54/ES 54- A
FINAL EXAM
March 9, 2011

NAME: __________________________
SCORE: ____________

1. Suppose that the parents of a young child decide to make annual payments
into a saving account, with the first payment being made on the child’s fifth
birthday and the last payment being made on the fifteenth birthday. Then
starting on the child’s eighteenth birthday, the withdrawals shown below will
be made. If the effective annual interest rate is 10% during this period of time,
what is the amount of the annuity in years 5 through 15?
3,200
2,800
2,400
2,000
5th Birthday
6 7 8 9 10 11 12 13 14 15

16 17 18 19 20 21

2. An engineering firm purchased 4 years ago a heavy planner for P120,000. The
life of the planner is 5 years, now the firm wishes to replaced the old planner
with a new model planner possessing several advantages. The new machine
will cost P150,000. How much new capital needed to make the purchase?
(Use straight-line method and double declining balance method).
3. A fixed cost associated with the production of a product is P500,000 per year.
Also, assume that the variable cost is P20,000 and selling price is P30,000 for
each percentage point of annual output capacity (and assume sales demand).
The maximum sales per year are P3,000,000.00 (at 100% of output capacity).
Determine the break-even point for this situation.
4. Two project studies for the construction of an engineering building are under
consideration. On one study the cost of the building is P650,000 with a life of
20 years and a salvage value of P40,000. Yearly maintenance and repair is
P1,800. The other proposes a first cost of P720,000 , life of 30 years and a
salvage value of P60,000. Yearly maintenance and repair is P20,000. If the
yield on the investment is 6%, determine which project study is acceptable
using annual cost method.
 ESC 54/ES 54
QUIZ NO. 1
November 17, 2011

NAME: _________________________________
SCORE: ______________________

Answer the following problems neatly. (20 points each problem)

1. A businessman invested P 1,000 and after 4 years, it becomes P 1,608.44 when he

invested at a certain rate of interest compounded bimonthly. Determine the
nominal rate and the corresponding effective rate.

2. A man borrowed P 20,000.00 from a local commercial bank which has a simple
interest of 16% but the interest is to be deducted from the loan at the time that the
money was borrowed, and the loan is payable at the end of one year. How much is
the actual rate of interest?

3. A man wishes his son to receive P200,000.00 ten years from now. What amount
should he invest if it will earn interest of 10 % compounded annually during the
first five years and 12 % compounded quarterly during the next five years.

4. At a certain interest rate compounded semiannually, P5,000 will amount to

P20,000 after 10 years. What is the amount at the end of 15 years?

5. A loan of P2,000 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?
 ESC 54/ES 54-A
QUIZ NO. 2
January 10, 2012

NAME: ___________________________________
SCORE: ____________

1. A man purchased a house for P425,000. In the first month that he owned the
house, he spent P75,000 on repairs and remodeling. Immediately after the house
was remodeled, he was offered P545,000 to sell the house. After some
consideration, he decided to keep the house and have it rented for P4,500 per
month starting two months after the purchase. He collected rent for 15 months and
then sold the house for P600,000. If the interest rate was 1.5% per month, how
much extra money did he make or lose by not selling the house immediately after
it was remodeled? (20 points)
2. What lump sum of money must be deposited into a bank account at the present
time so that P 5,000.00 per month can be withdrawn for five years, with the first
withdrawal scheduled for six years from today? The interest rate is 1% per month.
(Hint: Monthly withdrawals begin at the end of month 72.) (20 points)
3. On the day his grandson was born, a man deposited to a trust company a sufficient
amount of money so that the boy could receive five annual payments of P10,000
each for his college tuition fees, starting with his 18 th birthday. Interest at the rate
of 12% per annum was to be paid on all amounts on deposit. There was also a
provision that the grandson could elect to withdraw no annual payments and
receive a single lump amount on his 25th birthday. The grandson chose this option.
(30 points)
a. How much did the boy receive as a single payment?
b. How much did the father deposit?
4. A plastic manufacturing company is intending to expand its product facilities
starting 1988. The program requires the following estimates expenditures:
P1,000,000 at the end of 1988
P1,200,000 at the end of 1990
P1,500,000 at the end of 1993
To accumulate the required funds, it established a sinking fund constituting of
15 uniform annual deposits, the first deposit having been made at the end of
1979. The interest rate of fund is 12% per annum. (30 points)
c. Calculate the annual deposit
d. What will be the balance in the fund at the end of 1989?
 ESC 34-A/ES 34-A
QUIZ NO.3
January 19, 2012

NAME: _______________________________
SCORE: ____________

Solve the following problems @ 20 points each item:

1. A loan was to be amortized by a group of four end-of-year payments forming

an ascending arithmetic progression. The initial payment was to be P5,000
and the difference between successive payments was to be P400. But the loan
was renegotiated to provide for the payment of equal rather than uniformly
varying sums. If the interest rate of the loan was 15%, what was the annual
payment?
2. A contract has been signed to lease a building at P200,000 per year with an
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?
3. A firm considering the installation of an automatic data processing unit to
handle some of its accounting operations. Machines for that purpose may be
purchased for P20,000 or maybe leased for P8,000 for the first year and
P1,000 less every year now and then until the end of the 4th year. If money is
worth 15%, is it advisable to rent or buy the machine?
4. Find the uniform annual amount that is equivalent to a gradient series in
which the first year’s payment is P5,000.00, the second year’s payment is P
6,000.00, the third payment is P 7,000.00, and so on, and there is a total of 10
payments. The annual interest rate is 8%.
5. A construction company plans to accelerate the payments on an equipment
loan as production increases. The initial payment is $10,000 per year and the
plan is to increase the payment, beginning in year 2, by an additional $1,000
each year through year 10. Determine the equivalent annual payment if the
load interest rate is 12%.
 ESC 54- A/ES 54-A
QUIZ NO. 3
February 9, 2012

NAME: _________________________________
SCORE: ______________

1. Problem:

A new electric saw for cutting lumber in a furniture manufacturing plant has an
installed cost, or basis, of P140,000.00 and a 10 year estimated life. It was placed in
service on January 1, 1987. The permissible salvage value of the saw is zero at the
end of 10 years. What will be the a.) cumulative depreciation cost through the 6 th
year; b.) depreciation cost during the 6th year; c.) book value at the end of the 6th year.

Use :

a. Straight line method

b. Double declining method
c. Double declining method with switchover to straight line method
d. Sum of the year’s digit method
e. Sinking fund method if i = 8% compounded annually
f. Service output method; suppose that it will be used for a total of 10,000 hours
over a period of 10 years. In the sixth year of operation, the estimated usage is
800 hours and the cumulative usage by the end of year six is 6,400 hours.

2. Problem:

A machine shop purchased 10 years ago a milling machine for P60,000. A straight
line depreciation reserved had been provided on a 20 years life of the machine. The
owner of the machine shop desires to replace the old milling machine with a modern
unit of many advantages, costing P100,000. It can sell the old unit for P20,000. How
much new capital will be required for the purchase?
 ESC 54/ES 54- A
FINAL EXAM
March 6, 2012

NAME: __________________________
SCORE: ____________

1. Suppose that the parents of a young child decide to make annual payments
into a saving account, with the first payment being made on the child’s fifth
birthday and the last payment being made on the fifteenth birthday. Then
starting on the child’s eighteenth birthday, the withdrawals shown below will
be made. If the effective annual interest rate is 10% during this period of time,
what is the amount of the annuity in years 5 through 15? (30 points)
3,200
2,800
2,400
2,000
5th Birthday
6 7 8 9 10 11 12 13 14 15

16 17 18 19 20 21

2. An engineering firm purchased 4 years ago a heavy planner for P120,000. The
life of the planner is 5 years, now the firm wishes to replaced the old planner
with a new model planner possessing several advantages. The new machine
will cost P150,000. How much new capital needed to make the purchase?
(Use straight-line method and double declining balance method).(20 points)
3. A fixed cost associated with the production of a product is P500,000 per year.
Also, assume that the variable cost is P20,000 and selling price is P30,000 for
each percentage point of annual output capacity (and assume sales demand).
The maximum sales per year are P3,000,000.00 (at 100% of output capacity).
Determine the break-even point for this situation. (20 points)
4. A man is considering investing P500,000 to open a semi-automatic auto-
washing business in a city of 400,000 population. The equipment can wash,
on the average, 12 cars per hour, using two men to operate it and to do small
amount of hand work. The man plans to hire two men, in addition to himself,
and to operate the station on an 8-hour basis, 6 days per week, 50 weeks per
year. He will pay his employees P25.00 per hour. He expects to charge P25.00
for a car wash. Out-of-pocket miscellaneous cost would be P8,500 per month.
He would pay his employees for 2 week for vacations each year. Because
of the length of his lease, he must write off his investment within 5 years. His
capital now is earning 15%, and he is employed at a steady job that pays
P25,000 per month. He desires a rate of return of at least 20% on his
investment. (30 points)
Would you recommend the investment? (Use Rate of Return Method and
Annual Worth Method)
 ESC 54/ES 54
REMOVAL EXAM
March 14, 2012

NAME: _____________________________

1. 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 P2,000 in a fund at 15% annual interest. How old
will she be when the fund has an accumulated value of P1,000,000?
2. Two project studies for the construction of an engineering building are under
consideration. On one study the cost of the building is P650,000 with a life of 20
years and a salvage value of P40,000. Yearly maintenance and repair is P1,800.
The other proposes a first cost of P720,000 , life of 30 years and a salvage value
of P60,000. Yearly maintenance and repair is P20,000. If the yield on the
investment is 6%, determine which project study is acceptable using annual cost
method. Use annual worth method.
3. A shoe manufacturing produces a pair of shoes at a labor cost of P9.00 a pair and
a material cost of P8.00 a pair. The fixed charges on the business are P90,000 a
month and the variable costs are P4.00 a pair. If the shoes sells at P30.00 a pair,
how many pairs must be produced each month for the manufacturer to break-
even?
 ESC 54-A/ ES 54-A
QUIZ NO. 1
November 28, 2012

NAME: ____________________________________
SCORE: _____________

(20 points each number)

1. Accumulate P3,000 for 9 years at 6% compounded quarterly. What is the

compound interest rate?

2. A businessman wants to have P500,000 4 years from now. What amount should
he invest now if it will earn interest of 6% compounded quarterly for the first two
years and 8% compounded semi-annually during the next two years.

3. A businessman invested P 1,000 and after 4 years, it becomes P 1,608.44 when he

invested at a certain rate of interest compounded bimonthly. Determine the
nominal rate and the corresponding effective rate.

4. Annie buys a television set from a merchant who asks P1,250.00 at the end of 60
days (cash in 60 days). Annie 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?

5. Mr. J de la Cruz borrowed money from a bank. He received from the bank
P1,340.00 and promised to pay P1,500.00 at the end of 9 months. Determine the
simple interest rate.
 ES 54/ESC 54 – A
QUIZ NO. 2
January 14, 2013

NAME: ____________________________________
SCORE: ___________

Solve the following problems:

1. Today, you invest P100,000 into a fund that pays 25% interest compounded
annually. Three years later, you borrow P50,000 from a bank at 20% annual
interest and invest in the fund. Two years later, you withdraw enough money from
the fund to repay the bank loan and all interest due on it. Three years from this
withdrawal you start taking P20,000 per year out of the fund. After five
withdrawals, you withdraw the balance in the fund. How much was withdrawn?
(40 points)
2. 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 invest equal amount for his 41st to 59th birthdays in a fund earning
10% compounded annually. How much should each of these amounts be?
(20 points)
3. Mr. Reyes borrows P600,000 at 12% compounded annually, agreeing to pay the
loan in 15 equal annual payments. How much of the original principal is still
unpaid after he has made the 8th payment? (20 points)
4. 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? (20 points)
 ESC 54/ES 54 – A
QUIZ NO. 2
January 14, 2013

NAME: ____________________________________
SCORE: ___________

Solve the following problems:

1. 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 P2,000 in a fund at 15% annual interest. How old
will she be when the fund has an accumulated value of P1,000,000? (20 points)
2. Juan dela Cruz borrowed P2,400 at 1% per month payable in 24 equal end of the
month payments. How much of the loan remains unpaid immediately after he has
paid the 12th payment? (20 points)
3. Today, you invest P100,000 into a fund that pays 25% interest compounded
annually. Three years later, you borrow P50,000 from a bank at 20% annual
interest and invest in the fund. Two years later, you withdraw enough money from
the fund to repay the bank loan and all interest due on it. Three years from this
withdrawal you start taking P20,000 per year out of the fund. After five
withdrawals, you withdraw the balance in the fund. How much was withdrawn?
(40 points)
4. An employee obtained a loan of P10,000 at the rate of 6% compounded annually
in order to build a house. How much must he pay monthly to amortize the loan
within a period of 10 years? (20 points)
 ESC 54/ES 54 – A
QUIZ NO. 3
February 11, 2013

NAME: ____________________________________
SCORE: ___________

Solve the following problems:

1. A certain machinery costs P50,000 last 12 years with a salvage value of P5,000.
Money is worth 5%. If the owner decides to sell it after using it for 5 years, what
should his price be so that he will not lose or gain financially in the transaction?
Use the sinking fund method. (15 points)
2. An engineering firm purchased 12 years ago a heavy planner for P50,000.00. as
the life of the planner was 20 years, a straight line depreciation reserve has been
provided on that basis. Now the firm wishes to replace the old planner with a
newly designed planner possessing several advantages. It can sell the old planner
for P10,000.00 The new machine will cost P70,000.00. How much new capital
will be required to make the purchased? (20 points)
3. Erectors Co. owns earth moving equipment that cost P90,000.00. After 8 years it
will have estimated salvage value of P18,000.00. Compute the depreciation
charge for each for first two years and the book value at the end of 5 years by
each of the following three methods of depreciation accounting: (20 points)
a. Sum of the year’s digit method
b. Double declining balance method
4. A new electric saw for cutting lumber in a furniture manufacturing plant has an
installed cost, or basis, of P140,000.00 and a 10 year estimated life. It was placed
in service on January 1, 1987. The permissible salvage value of the saw is zero at
the end of 10 years. What will be the a.) cumulative depreciation cost through the
6th year; b.) depreciation cost during the 6th year; c.) book value at the end of the
6th year. Use the following methods: (30 points)
a. Double declining method with switchover to straight line method
b. Service output method; suppose that it will be used for a total of 10,000 hours
over a period of 10 years. In the sixth year of operation, the estimated usage is
800 hours and the cumulative usage by the end of year six is 6,400 hours.
5. A construction company plans to accelerate the payments on an equipment loan as
production increases. The initial payment is $10,000 per year and the plan is to
increase the payment, beginning in year 2, by an additional $1,000 each year
through year 10. Determine the equivalent annual payment if the load interest rate
is 12%. (15 points)
 ESC 54/ES 54- A
FINAL EXAM
March 14, 2013

NAME: __________________________
SCORE: ____________

1. Suppose that the parents of a young child decide to make annual payments
into a saving account, with the first payment being made on the child’s fifth
birthday and the last payment being made on the fifteenth birthday. Then
starting on the child’s eighteenth birthday, the withdrawals shown below will
be made. If the effective annual interest rate is 10% during this period of time,
what is the amount of the annuity in years 5 through 15? (30 points)
3,200
2,800
2,400
2,000
5th Birthday
6 7 8 9 10 11 12 13 14 15

16 17 18 19 20 21

2. An engineering firm purchased 4 years ago a heavy planner for P120,000. The
life of the planner is 5 years, now the firm wishes to replaced the old planner
with a new model planner possessing several advantages. The new machine
will cost P150,000. How much new capital needed to make the purchase?
(Use straight-line method and double declining balance method).(20 points)
3. In a small factory hand-made products the workers receives P2.50 per
acceptable piece. If a worker produces 80 pieces per day, 5% would be
rejected. If a worker produces 90 pieces per day, 10% would be rejected. If a
worker produces 100 pieces per day, 20% would be rejected. Cost of materials
per piece is P15.50 with a fixed overhead cost of P50.00 per worker per day
regardless of the change in output. At which three output is the cumulative
cost the lowest? (20 points)
4. A man is considering investing P500,000 to open a semi-automatic auto-
washing business in a city of 400,000 population. The equipment can wash,
on the average, 12 cars per hour, using two men to operate it and to do small
amount of hand work. The man plans to hire two men, in addition to himself,
and to operate the station on an 8-hour basis, 6 days per week, 50 weeks per
year. He will pay his employees P25.00 per hour. He expects to charge P25.00
for a car wash. Out-of-pocket miscellaneous cost would be P8,500 per month.
He would pay his employees for 2 week for vacations each year. Because
of the length of his lease, he must write off his investment within 5 years. His
capital now is earning 15%, and he is employed at a steady job that pays
P25,000 per month. He desires a rate of return of at least 20% on his
investment. (30 points)
Would you recommend the investment? (Use Rate of Return Method)
 REMOVAL EXAM
ESC 54-A
March 20, 2013

NAME: ______________________________
SCORE: _________

1. A shoe manufacturing produces a pair of shoes at a labor cost of P9.00 a pair

and a material cost of P8.00 a pair. The fixed charges on the business are
P90,000 a month and the variable costs are P4.00 a pair. If the shoes sells at
P30.00 a pair, how many pairs must be produced each month for the
manufacturer to break-even? (30 points)

2. A debt of P40,000 whose interest rate is 15% compounded semiannually, is to

be discharged by a series of 10 semiannual payments, the first payment to be
made 6 months after consummation of the loan. The first 6 payments will be P
6,000 each, while the remaining 4 payments will be equal and of such amount
that the final payment will liquidate the debt. What is the amount of the last 4
payments? (40 points)

3. A contract has been signed to lease a building at P200,000 per year with an
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? (30 points)
 ES 50
QUIZ NO. 1
April 15, 2019

NAME: _________________________________
SCORE: ______________________

Answer the following problems neatly. (20 points each problem)

1. If you borrow money from your friend with simple interest of 12 %, find the
present worth of P20,000.00, which is due at the end of nine months.

2. Suppose a $100 lump-sum amount is invested for 10 years at 6 % compounded

quarterly. How much it is worth at the end of the tenth year? What is the effective
interest rate?

3. A man wishes his son to receive P200,000.00 ten years from now. What amount
should he invest if it will earn interest of 10 % compounded annually during the
first five years and 12 % compounded quarterly during the next five years.

4. At a certain interest rate compounded semiannually, P5,000 will amount to

P20,000 after 10 years. What is the amount at the end of 15 years?

5. A loan of P2,000 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?