Black = correct answers
P2500 each year during its 4-year life. If
Red = syempre mali saka diko alam sagot
hehe
Green = tama pero mali sa canvas
1. Consider a project that involves the
investment of $100,000 now and $100,000
at the end of year 1. Revenues of $150,000
will be generated at the end of years 1 and
2. What is most nearly the net present value
of this project if the effective annual interest
rate is 10%.
$69500
2. A series of equal payments made at equal
intervals and has no end.
Perpetuity
3. A bank is advertising 9.5% accounts that
yield 9.84% annually. How often the interest
is compounded?
Quarterly
4. The construction of a volleyball court for the
employees of a highly successful mid-size
publishing company in California is
expected to cost $1200 and have annual
maintenance cost of $300. At an effective
annual interest rate of 5%, what is the
projects capitalized cost?
$7200
5. Estimated resale value of an asset at the
end of its useful life.
A and B (Scrap Value, Salvage Value)
6. Corporation manufactures bookcases that it
sells for $65 each. It cost corporation
$35000/yr to operate its plant. This sum
includes rent, depreciation charges on
equipment, and salary payments. If the cost
to produce one bookcase is $50, how many
bookcases must be sold each year to avoid
taking a loss?
2334 bookcases/yr
7. It cost P500,000 at the end of each year to
maintain a segment of Kennon Rd. in
Baguio City. If money is worth 10% how
much would it pay to spend immediately to
reduce the annual cost to P100,000.
P400,000
8. The year-end operating and maintenance
cost of a certain machine are estimated to
be P12,000 the first year and to increase by
capital is worth 12%, determine the
equivalent uniform year-end cost?
P15, 397.13
9. A company invest $1000 today to be repaid
in 5 years in one lump sum at 12%
compounded annually. If the rate of inflation
is 3% compounded annually, approximately
how much profit, in present day dollars, is
realized over the 5 years?
5200
10. Annuity that has no end, or a stream of cash
payments that continues forever.
Perpetuity
11. Cash flows that increase or decrease by a
constant amount.
Arithmetic gradient
12. What must two investments with the same
present worth and unequal lives have?
Different equivalent uniform annual cash
flows
13. $1000 is deposited into a 9% account today.
At the end of 2 years, another $3000 will be
deposited. In 5 years, a $4000 purchase will
be made. Approximately how much will be
left in the account 1 year after the
purchase?
 $1230
 $1690 (mali daw to)
 $1420
 $1540 (tama)
14. A gold mine is projected to produce $20,000
during its first year of operation, $19,000
during its second year, $18,000 the third
year, and so on. If mine is expected to
produce for a total of 10 years, and the
effective annual interest rate is 6%, what is
its present worth.
$118,000
15. Which of the following statements is not
correct?
 $1 compounded quarterly at 3%for n
year has a future value of (1.03)4n
 A nominal rate of 12% per annum
compounded quarterly is the same
as 12%/4 = 3%/quarter.
 Compounding quarterly at a nominal
rate of 12%/yr is equivalent to
 compounding annually at a rate of
12.55%(mali daw to)
 Effective rate of return in options (a),
(b), and (c) is the difference between
12.55% and 12%
16. What is an annuity?
A series of uniform amounts over a
period of time.
17. A person invests $450 to be collected in 8
years. Given that the interest rate on the
investment is 14.5%/yr., compounded
annually, most nearly what sum will be
collected 8 years from now?
$1330
18. A farmer bought a farm he paid P10,000
cash and agreed to pay P2000 at the end of
each month 6 months for 5 years. He failed
to pay the first 5 payments. At the end of 3
tears he is required by the seller the 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?
P20,880.85
19. A cash flow that repeats each period without
change in amount is called
Annuity
20. If money is worth 8% compounded
quarterly, what is the present value of an
annuity of P1000 payable quarterly for 50
years?
P49,047.35
21. A reduction in the value of an asset with the
passage of time, due to wear and tear.
Depreciation
22. The contractor for a road project in Calamba
City has proposed two options: asphalt
pavement and thick concrete pavement as
shown in the table. What is the capitalized
cost of the thick concrete pavement if
money is worth 8% compounded annually?
Asphalt Thick
concrete
Cost P100,000 P250,000
Minor P105,000 P20,000
Repairs
Life span 5 3
P327,008.38
23. What must two investments with the same
present worth and unequal lives have?
Different equivalent uniform annual cash
flows
24. Debt securities issued by a government to
finance military operations and other
expenditure in times of war.
War bonds
25. At an annual rate of return of 8%, what is
the future worth of $100 at the end of year
4?
$136
26. During the first 10 years of the life of a
certain machine the following were spent for
its maintenance; During the first 5 years,
P3000 was spent each year; during the
second 5 years, P5000 each year was
spent. In addition, P8000 was spent for
overhauling at the end of the fourth year,
and P10,000 was also for overhauling at the
end of 9th. If the money is worth 9%
compounded annually, what was the
present worth of the various expenditures?
P34580.36
27. Which plan is the least expensive way to
purchase plant maintenance equipment?
The discount rate is 11%.
Plan A: $50000 down, equal
payments of $25,115.12 for
20 years
Plan B: Nothing down, equal
payments of $31393.91 for 20
years
Plan C: $100000 down, equal
payments of $21975.74 for 20
years
 Plan C (tama)
 Plan B
 Plan A or B
 Plan A (mali daw to)
28. What is most nearly the present worth of a
$100 annuity over a 10-year period if the
interest rate is 8%?
$670
29. With 12% interest rate, approximately how
much money must be invested today in
order to withdraw $1000 per year at the end
of each year for 10 years?
$5650
30. Assuming I = annual rate of return, n= 34. When using net present worth calculations
number of years, F = future worth, and P = to compare the projects, which of the
present worth, what is the future worth of a following could invalidate the calculation?
present amount P?  Non-conventional cash flows
P(1+i) n  Evaluating over different time
31. Princess Fiona bought a brand-new periods
washing machine costing P12000 if paid in  Mutually exclusive projects
cash. However, she can purchase it on  Differences in magnitude of project
installment basis to be paid within 5 years. If (mali daw to)
money is worth 8% compounded annually, 35. A farmer bought a farm he paid P10,000
what is her yearly amortization if all cash and agreed to pay P2000 at the end of
payment is to be made at the beginning of each month 6 months for 5 years. He failed
each year? to pay the first 5 payments. At the end of 3
2400 (ayon sa canvas) tears he is required by the seller the entire
P2782.85 (kaso mali sa canvas but please debt consisting of his accumulated and
check in page 89 sa violet book, same future liabilities, otherwise the farm would
problem niyan at yan yung sagot don) be foreclosed by the seller. What is the cash
32. The following schedule of funds is available value if money is worth 12% compounded
to form a sinking fund. semi-annually?
 P20,000 (correct ans. Sa canvas)
T = 0 yr $5000
P24,720.17 (kaso mali sa canvas but
T = 1 yr $4000
T = 2 yr $3000 please check in page 68 sa violet book,
T = 3 yr $2000 same problem niyan at yan yung sagot don)
At the end of fourth year, equipment costing 36. The contractor for a road project in Calamba
$25000 will have to be purchased as a City has proposed two options: asphalt
replacement for old equipment. Money is pavement and thick concrete pavement as
valued at 20% by the company. At the time shown in the table. What is the capitalized
of purchase, how much money will be cost of the asphalt pavement if money is
needed? worth 8% compounded annually?
 $820 Asphalt Thick
 $1000 (TAMA) concrete
 $8200 (mali din) Cost P100,000 P250,000
 $2000 (mali daw to) Minor P105,000 P20,000
33. The contractor for a road project in Calamba Repairs
City has proposed two options: asphalt Life span 5 3
P323,724.10
pavement and thick concrete pavement as
shown in the table. What is the capitalized 37. When using net present worth calculations
cost of the thick concrete pavement if to compare the projects, which of the
money is worth 8% compounded annually? following could invalidate the calculation?
 Non-conventional cash flows (mali
Asphalt Thick
concrete rin hehe)
Cost P100,000 P250,000  Evaluating over different time
Minor P105,000 P20,000 periods (tama)
Repairs  Mutually exclusive projects
Life span 5 3  Differences in magnitude of project
NOTE: NAGKAMALI NG TANONG DITO!
(mali daw to)
Dapat which is the better option?
38. What is “work in process” classified as?
Asphalt pavement
An asset
39. What a borrower of a particular loan always
required to do during repayment?
b. Repay the loan over an agreed-upon
amount of time
40. Suppose a man receives an initial annual
salary of P60,000, increasing at the rate of
P5000 a year. If money is worth 10%,
determine his equivalent uniform salary for
a period of 8 years?
P75022.39
41. It is an expense that is added to the cost
basis of a fixed asset on a company’s
balance sheet. It is also the most important
application of perpetuity.
Capitalized Cost
42. During the first 10 years of the life of a
certain machine the following were spent for
its maintenance; During the first 5 years,
P3000 was spent each year; during the
second 5 years, P5000 each year was
spent. In addition, P8000 was spent for
overhauling at the end of the fourth year,
and P10,000 was also for overhauling at the
end of 9th. If the money is worth 9%
compounded annually, what was the
equivalent uniform annual cost for the ten-
year period?
P5388.36
43. An investment of x dollars is made at the
end of each year for 3 years, at an interest
rate of 9% per year. What will the dollar
value of the total investment be, most
nearly, upon the deposit of the third
payment?
 $2.3x
 $3.3x
 $1.3x (mali to)
 $0.77x
44. A steel drum manufacturer incurs a yearly
fixed operating cost of $200,000. Each drum
manufacturer cost $160 to produce and
sells it for $200. What is the manufacturers
break-even sales in drums per year?
5000
45. If money is worth 8% compounded
quarterly, what is the present value of an
annuity of P1000 payable quarterly for 100
years?
P49,021.75 (ayon sa canvas)
P49,981.85 (kaso mali sa canvas but
please check in page 77 sa violet book,
same problem niyan at yan yung sagot don)
46. A condition where total sales are equal to
total cost of production.
Break even
47. What is the present worth of two $100
payments at the end of the third and fourth
years if the annual interest rate is 8%?
$153
48. Which of the following situations has a
conventional cash flow so that an internal
rate of return can be safely calculated and
used?
You invest in a safe dividend stock and
receive dividends each year.
49. A machine is under consideration for
purchase. The cost of the machine is
$25,000. Each year it operates, the machine
will generate a savings of $15,000. Given
an effective annual interest rate of 18%,
what is the discounted payback period on
the purchase in the machine?
2.15 yr
50. If money is worth 8% compounded
quarterly, what is the present value of
perpetuity of P1000 payable quarterly?
P50,000 (kaso mali sa canvas but please
check in page 77 sa violet book, same
problem niyan at yan yung sagot don)