Ordinary Annuity
(B 4-02) A steam boiler is purchased on the basis of
guaranteed performance. However initial tests indicate
that the operating cost will be P400 more per year than
guaranteed. If the expected life is 25 years and money is
worth 10%, what deduction from the purchase price
would compensate the buyer from the additional
operating cost?
(B 4-03) A one-bagger concrete mixer can be purchased
with a down payment of P8,000 and equal installments
of P600 each paid at the end of every month for the
next 12 months. If money is worth 12% compounded
monthly, determine the equivalent cash price of the
mixer.
(B 4-04) The buyer of a certain machine may pay either
P2,000 cash down payment and P2,000 annually for the
next 6 years, or pay P3,500 cash and P2,000 annually for
the next 5 years. If money is worth 12% compounded
annually, which method of payment is better and by
how much?
(B 4-05) A farmer bought a farm and he paid P10,000
cash and agreed to pay P2,000 at the end of each 6
months for 5 years. He failed to pay the first 5
payments. At the end of 3 years, he is required by the
seller to entire debt consisting of his accumulated and
future liabilities, otherwise the farm would be
foreclosed by the seller. What must he pay if money is
worth 12% compounded semi-annually.
(B 4-06) How much money would you have to deposit
for five consecutive years starting one year from now if
you want to be able to withdraw P50,000 ten years
from now? Assume interest is 14% compounded
annually.
Deferred Annuity
(B 4-13) A lathe for a machine shop costs of P60,000 if
paid in cash. On the installment plan, a purchaser
should pay P20,000 down payment and 10 quarterly
installments, the first due at the end of the first year
after purchase. If money is worth 15% compounded
quarterly, determine the quarterly installment.
(B 4-14) A man invests P10,000 now for the college
education of his 2-year old son. If the fund earns 14%
effective, how much will the son get each year starting
from his 18th to the 22nd birthday?
Annuity Due
(B 4-17) A farmer bought a tractor consisting of P25,000
payable in 10 semi-annual payments, each installment
payable at the beginning of each period. If the rate of
interest is 26% compounded semi-annually, determine
the amount of each installment.
(A 2-22) 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?
Perpetuity and Capitalized Cost
(A 2-25) Determine the capitalized cost of a structure
that requires an initial investment of P1,500,000 and an
annual maintenance of P150,00. Interest is 15%.
(B 4-22) To maintain a bridge, P5,000 will be required at
the end of 3 years and annually thereafter. If money is
worth 8%, determine the capitalized cost of all future
maintenance.