Republic of the Philippines

BATANGAS STATE UNIVERSITY

Pablo Borbon Main II
Batangas City

COLLEGE OF ENGINEERING, ARCHITECTURE & FINE ARTS

MIDTERM EXAMINATION

Name: Villaverde Alan A.

Section: CE 3103

Instruction: Fill in the blanks with the correct answer. No need to attach the solution to each problem.

c 1 Which of the following scenarios below exhibits a fundamental principle of engineering economy?
a Phoebe decides to buy a medicine before knowing Monica's illness
b Marshall and Lily went on to buy the apartment down the hall for its price, amenities, and convenience
going to Maclaren's
c Gordon is deciding whether to purchase a 100 EUR frying pan over a 5,000 PHP air fryer
d Jane immediately closed Project Fizzle Bomber after deciding to implement it.

d 2 Which of the following statements below is true?

a Once problem is recognized, formulation should be from a biased perspective
b Nonmonetary factors are irrelevant in evaluating an alternative
c Decisions should be made based on short-term economic interest
d Problems can be redefined depending on how the needs and requirements change

d 3 Which of the following statements below is false?

a Demand curve shows that quantity demanded behaves inversely with price
b Supply curve shows that quantity supplied behaves directly with price
c Increasing your production input yields an output at constant rate over an indefinite time
d Indirect costs are sometimes called as overheads

c 4 Total project cost was estimated at PhP 1,000,000 -50% went to labor, 25% went to leased equipment,
15% went to insurance and business fees, and remaining went to administrative overheads. How much is
total direct cost from this given budget?
a PhP 150,000
b PhP 100,000
c PhP 500,000
d PhP 1,000,000

d 5 Graphically, law of supply and demand states that price at which quantity will be supplied and demanded
is the point at which the linear demand and supply curve intersect, provided under the conditions of a
perfect competition. Which of the following is true under this premise?
a Any price beyond this point will result to either surplus or shortage in supply
b Seller can control the market price for a certain commodity
c A shift in either demand or supply curve does not change equilibrium point
d As price falls, quantity supplied increases proportionately

d 6 Determine the exact simple interest for a PhP 20,000 loan made in September 23, 2020 to be paid off on
December 25, 2023 at interest rate of 7% per year (rounded up to '00).
a 4,900.00
b 4,800.00
c 4,700.00
d 4,600.00

b 7 Ted borrowed a loan from Goliath National Bank to start his own architecture firm. He loaned PhP
150,000 at interest rate of 7% compounded semi-annually. What interest rate would give him the same
accumulated amount at the end of 12 years provided the bank changed its policy to monthly
compounding?
a 7.20%
b 6.90%
c 6.60%
d 6.30%
b 8 Dr. Strange deposits PhP 75,000 in a New York City bank paying an annual interest rate of 8%
compounded continuously. How much will be the total interest earned after 2 years?
a 88,013.32
b 13,013.32
c 87,480.00
d 12,480.00

d 9 Claire and Phil decided to open a savings account for Luke's college education. They initially deposited
PhP 20,000 which earns at interest rate of 8% compounded quarterly. How much can be withdrawn 6
years from now if Luke chooses to split the amount equally into 4 consecutive yearly withdrawals?
a 4,882.52
b 9,765.05
c 2,441.26
d 7,323.78

a 10 Tony will build the new Stark Building at a projected investment cost of PhP 1,250,000. To maintain
structural integrity, JARVIS Inc. needs to perform maintenance at annual run cost of PhP 600,000,
expected after 5 years and annually thereafter. If cost of capital is 8%, determine the capitalized cost for
this project.
a 6,762,723.90
b 5,512,723.90
c 6,890,904.87
d 5,072,042.92

c 11 Which of the following statements is true about depreciation?

a Accumulated depreciation increases by a fixed percentage year-on-year using SLM
b Annual depreciation cost increases by a fixed amount year-on-year using SFM
c Annual depreciation cost increases by a fixed percentage year-on-year using SLM
d Annual depreciation increases by a fixed percentage year-on-year using SFM

c 12 James bought a new camera for his "Late Late Show" segment which cost him PhP 20,000. The camera
is said to be functional for 10 years with resale value equal to PhP 5,000 at the end. What are the rates of
depreciation if James will be using the DBM and DDBM, respectively?
a 12.94%, 15.00%
b 12.54%, 15.00%
c 12.94%, 20.00%
d 12.54%, 20.00%

a 13 Which of the following statements is false about depreciation?

a Using SOYDM, rate of depreciation generally declines year after year
b Using DBM, BV after n years is equal to FC x (1-k)^n
c Using SOM, annual depreciation scales with other costs incurred for each year
d Using DDBM, BV after n years is equal to FC x (1-k)^n

a 14 James bought a new camera for his "Late Late Show" segment which cost him PhP 20,000. The camera
is said to be functional for 10 years with resale value equal to PhP 5,000 at the end. How much will the
camera be valued after 3 years if James decided to sell it to Jimmy? Assume DBM.
a 13,195.08
b 9,896.31
c 16,493.85
d 6,597.54

d 15 Anna purchased a new oven for PhP 50,000 which according to the confident salesman, could produce
100,000 cupcakes over its useful life of 2 years, and could be resell at 10% of its original value. Anna
was able to bake 23,000 cupcakes in the first year, and 26,000 cupcakes in the second year. Which of the
following statements holds true under this premise?
a Using SOM, Anna is able to fully recover her initial investment after two years
b Annual depreciation cost during Year 1 is higher using SOM than using SLM
c Annual depreciation cost during Year 2 is higher using SOM than using SLM
d Annual depreciation cost during Year 2 is higher using SLM than using SOM

d 16 Tipton Inc. was able to struck gold from an old mine in Boston wherein 35,000 tons of gold could be
extracted. Zack and Cody, couple of miners, extracted 15,000 tons in the first year. What is the depletion
rate per ton of gold extracted, and depletion charge for the first year given acquisition cost of PhP
2,000,000 and no salvage value?
a 59.14; 857,142.86
b 57.14; 837,142.86
c 56.14; 847,142.86
d 57.14; 857,142.86
a 17 Determine the amount accumulated ten years from now by an investment of PhP 200,000 if the money
will earn interest at rate of 2% compounded quarterly during the first 4 years, and 12% compounded
monthly during the remaining years?
a 443,430.84
b 332,573.13
c 376,916.22
d 421,259.30

b 18 How many years will have to pass for a particular investment to double itself? Use a nominal interest rate
of 14% compounded continuously.
a 4.46
b 4.95
c 3.96
d 4.21

d 19 Which of the following statements is true about types of business organization?

a Sole proprietorship is the most difficult to organize
b A partnership is formed if and only if two people are involved
c A corporation is dissolved when its stockholders change
d A corporation is a separate legal entity from its owners

a 20 Which of the following statements is true about the single payment present worth factor?
a At the same interest rate, (P/F,i,n) will always be smaller as n decreases
b At the same interest rate, (P/F,i,n) will always be larger as n decreases
c At the same interest rate, (P/F,i,n) will always be larger as n increases
d None of the above

d 21 Ellen invested PhP 2,000,000 in a project which will produce an annual revenue of PhP 500,000 over the
next 20 years. Annual overheads (i.e., taxes and insurance) are estimated to be 2% of the first cost. What
percentage of annual revenue should the other operating cost be capped to be able to recover the
investment in 10 years? Assume no salvage value.
a 57%
b 55%
c 52%
d 50%

a 22 Anna purchased a new oven for PhP 50,000 which according to the confident salesman, could produce
100,000 cupcakes over its useful life of 2 years, and could be resell at 10% of its original value. Anna
was able to bake 23,000 cupcakes in the first year, and 26,000 cupcakes in the second year. What is the
accumulated depreciation cost after two years?
a 22,050.00
b 19,845.00
c 26,460.00
d 24,255.00

b 23 Eggsy bought a new machine from Kingsman Corp. which cost him PhP 5,000,000. Freight and
installation charges included would cost him another 7% of the original price. What resale value would
give him the same book value after 3 years if he would depreciate the equipment using DBM and
DDBM, respectively? Assume useful life of 15 years.
a 687,904.05
b 625,367.32
c 562,830.59
d 594,098.95

c 24 Which of the following statements is true about the single payment compound amount factor?
a At the same interest rate, (F/P,i,n) will always be smaller as n increases
b At the same interest rate, (F/P,i,n) will always be larger as n decreases
c At the same interest rate, (F/P,i,n) will always be larger as n increases
d None of the above

d 25 Cobb and Ariadne loaned from Totem Bank PhP 28,000 which is to be repaid by equal payments every
quarter for the next 5 years. Given interest rate of 7% compounded continuously, how much will be the
amount of each payment?
a 7,562.35
b 6,187.38
c 6,531.12
d 6,874.86
a 26 True or False. Engineering economy provides a systematic framework for evaluating the economic
aspects of competing design solutions.
a 1
b 0
c
d
b 27 The quantity of a certain commodity that is bought at a certain price at a given place and time.
a Supply
b Demand
c Necessities
d Luxuries

c 28 Those products or services that are directly used by people to satisfy their wants.
a Market
b Price
c Consumer goods and services
d Producer goods and services

d 29 Transactions arranged as a series of annuity payment at regular intervals.

a Annuity series
b Cash flow
c Ordinary annuity
d Equal uniform series

a 30 Computed on the basis of 12 months of 30 days each which is equivalent to 360 days a year.
a Ordinary simple interest
b Exact simple interest
c Effective interest
d Nominal interest

a 31 Summation of all costs, both recurring and nonrecurring, related to products, structure system.
a Life-cycle cost
b Total cost
c Investment cost
d Product cost

b 32 What amount must be paid in two years to settle the current debt of $1000 if the interest rate is 6%?
a 120.00
b 1,120.00
c 1,124.00
d 1,110.00

c 33 A new widget twister, with a life of six year would save $2,000 in production costs each year. Using a
12% interest rate, determine the highest price that could be justified for the machine.
a 1,013.26
b 8,222.81
c 1,440.00
d 3,947.65

d 34 Compute the effective annual interest rate equivalent to 5% nominal interest compounded continuously.
a 0.02%
b 5.04%
c 5.13%
d 0.05%

d 35 The annual amount of a series of payments to be made at the end of each of the next twelve years is
$500. What is the present worth of the payment at 8% interest compounded annually?
a 500.00
b 6,872.00
c 6,480.00
d 3,768.00

b 36 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?
a 5,750.00
b 5,937.50
c 5,600.00
d 11,250.00

d 37 Assume an individual is wanting to determine the ending balance after 1 year based on monthly deposits
of $1,000 in an account that has 6% continuous compounding. What was the amount of money today?
a 11,618.00
b 995.01
c 1,000.00
d 1,061.84
b 38 Depreciation is define as the increase or decrease in value of physical property.
a 1
b 0
c
d

b 39 Book value is also known as appraisal value.

a 1
b 0
c
d

d 40 A generator costing P750,000 depreciates in value each year by 20% of its value. Find its book value
when the generator is 5 years old using DBM.
a 190,500.00
b 150,000.00
c 750,000.00
d 245,760.00

a 41 Kaizen Corporation makes it a policy that for any new equipment purchased, the annual depreciation cost
should not exceed 20% of the 1st cost at any time with no salvage value. Determine the service life
necessary if the depreciation method used is SOYD.
a 9 years
b 3 years
c 6 years
d 12 years

d 42 A fixed asset cost $12,000 and sold for $5,000. At the date of disposal, its net book value is $2,000. So
what is the profit or loss on disposal of thus fixed asset?
a 2,000 (loss)
b 2,000 (profit)
c 3,000 (loss)
d 3,000 (profit)

b 43 A machine was bought for $100,000. Its estimated useful life is four years with a residual value of
$10,000. Depreciation is charged on SLM. What is the percentage of depreciation rate on the annual
basis?
a 15%
b 25%
c 35%
d None of the above

c 44 If $10,000 is borrowed now at 6% interest, how much will remain to be paid after a $3,000 payment is
made four years from now?
a 7,000.00
b 9,400.00
c 9,625.00
d 9,725.00

c 45 If P500,000 is invested at 8% interest compounded quarterly, how many years will it take for this amount
to accumulate to P900,000?
a 29.68 years
b 14.84 years
c 7.42 years
d 11.56 years

a 46 It costs P500,000 at the end of each year to maintain a section of Kennon Road in Baguio City. If money
is worth 10%, how much would it pay to spend immediately to reduce the annual cost to P100,000?
a 4M
b 5M
c 1M
d None of the above

c 47 APIEMS Corporation is establishing a sinking fund for the purpose of accumulating a sufficient capital
to retire its outstanding bonds at maturity. The bonds are redeemable in 10 years and their maturity value
is P10M. How much should be deposited each year if the fund pays interest at the rate of 4%?
a 1,232.91
b 400,000.00
c 832,909.44
 d 1,234,142.35

c 48 Philex Oil Refinery developed an oil well which is estimated to contain 7M barrels of oil at an initial cost
of $75M. What is the depletion charge during the year where it produces 1M barrels of oil? Use the Unit
or Factor Method in computing depletion.
a 1M
b 7.5M
c 10.71M
d 18.21M

b 49 A company estimates that insulation of steam pipes in the factory will reduce the fuel bill by as much as
25%. The cost of the insulation is P100,000 installed and the annual cost of taxes and insurance is 6% of
the first cost. Without the insulation, the annual fuel bill is P200,000. If the insulation is worthless after 5
years of use, and a minimum return on investment of 10% is desired, would it be worthwhile to invest in
the insulation? Solve using the ROR method and assume incurred fuel bill as sunk cost.

a ROR=10%; yes invest

b ROR=27.62%; yes invest
c ROR=7.62%; do not invest
d ROR=23.13%; do not invest

a 50 A proposed manufacturing plant will require a fixed capital investment of P6M and an estimated working
capital of P1M. Annual depreciation is estimated to be 5% of the fixed capital investment. If the annual
profit is P3M, determine the minimum payback period.
a 2.33 years
b 3.23 years
c 3.33 years
d 3.22 years

-End-