TCCB 421 - ENGINEERING ECONOMICS

Final Homework 02
Directions:
a) Solve the following questions
b) Filename format: Surname_ECO_Fin_HW02
b) Submit in PDF format as one file.
Questions:
1. A machine worth Php800,000 is bought from China. Freight charges amount to Php200,000.

If the scrap value of the machine is Php50,000 that occurs at the end of 17 years. Compute

(a) the depreciation and

(b) book value at the end of 11 years.

Given:

𝑉 = 800 000 + 200 000 = 1 000 000

𝑉𝑠 = 50 000 𝑛 = 17

Solution:

(a) the depreciation and

𝑉−𝑉𝑠 1 000 000 − 50 000 𝑑 = 55 882. 35

𝑑= 𝑑 = 17
𝑛

(b)book value at the end of 11 years.

𝑉𝑎 = 𝑉 − 𝑎𝑑 𝑉11 = 385 294. 15

𝑉11 = 1 000 000 − (11)( 55 882. 35)

2. Equipment bought for Php60,000 is expected to last for 30 years. If the scrap value after

20 years is Php20,000. How much is the depreciation for year 10?

Given:

𝑉 = 60 000 𝑉20 = 20 000

𝑛 = 30

Solution:

𝑉𝑎 = 𝑉 − 𝑎𝑑 40 000 𝐷 = 𝑎𝑑
𝑑= 20

20 000 = 60 000 − 20𝑑 𝐷 = 10(2000)

𝑑 = 2000

20 𝑑 = 60 000 − 20 000 𝐷 = 20 000

3. A plant bought a calciner for P560,000 and used it for 25 years, the life span of the

equipment. What is the book value of the machine after 12 years of use?

(a) Assume a scrap value of P55,000 for straight line method;

(b) 48,0000 the declining balance method;

(c) P42,000 for the double declining balance method.

Given:

𝑉 = 560 000

𝑛 = 25

𝑎 = 12
Solution:

(a) Assume a scrap value of P55,000 for straight line method;

𝑉−𝑉𝑠 𝑉𝑎 = 𝑉 − 𝑎𝑑
𝑑= 𝑛

560 000 − 55 000 𝑉12 = 560 000 − (12)(20 200)

𝑑= 25

𝑉12 = 317 600

𝑑 = 20 200

(b) 48,0000 the declining balance method;

𝑎
𝑛 𝑉𝑠 𝑉𝑎 = 𝑉(1 − 𝑘)
𝑘=1− 𝑉

12
25 48 000 𝑉12 = 560 000(1 − 0. 0936)
𝑘=1− 560 000

𝑉12 = 172 197. 48

𝑘 = 0. 0936

(c) P42,000 for the double declining balance method.

2 𝑎
𝑘= 𝑛 𝑉𝑎 = 𝑉(1 − 𝑘)

2 12
𝑘= 25 𝑉12 = 560 000(1 − 0. 08)

𝑘 = 0. 08 𝑉12 = 205 893. 18

4. Determine the rate of depreciation, the total depreciation up to the end of the 12th year and

the book value at the end of 8 years for an asset that costs P25,000 new and has an estimated

scrap value of P4,500 at the end of 15 years by

(a) the declining balance method

(b) the double declining balance method.

Given:
𝑎= 8 𝑉𝑠 = 4 500

𝑉 = 25 000 𝑛 = 15

Solution:
(a) the declining balance method

Rate of depreciation

𝑛 𝑉𝑠 15 4 500 𝑘 = 0. 108 = 10. 8%

𝑘= 1− 𝑘=1− 25 000
𝑉

Total depreciation up to the end of the 12th year

𝑎 𝐷8 = 𝑉 − 𝑉8
𝑉𝑎 = 𝑉(1 − 𝑘)

8 𝐷8 = 25 000 − 10 019. 8
𝑉8 = 25 000(1 − 0. 108)

𝐷8 = 14 980. 2
𝑉8 = 10 019. 8

Book value at the end of 8 years

𝑎 8 𝑉8 = 10 019. 80
𝑉𝑎 = 𝑉(1 − 𝑘) 𝑉8 = 25 000(1 − 0. 108)
(b) the double declining balance method.

Rate of depreciation

2 2 𝑘 = 0. 1333
𝑘= 𝑛
𝑘= 15

Total depreciation up to the end of the 12th year

𝑎 𝐷8 = 𝑉 − 𝑉8
𝑉𝑎 = 𝑉(1 − 𝑘)

8 𝐷8 = 25 000 − 7959. 58
𝑉8 = 25 000(1 − 0. 1333)

𝐷8 = 17 040. 42
𝑉8 = 7959. 58

Book value at the end of 8 years

𝑎 8 𝑉8 = 7959. 58
𝑉𝑎 = 𝑉(1 − 𝑘) 𝑉8 = 25 000(1 − 0. 1333)