ENGINEERING ECONOMICS QUESTIONS

PROBLEM SOLVING:

1. If you borrowed money from your friend with simple interest of 12%, find the present worth of
P50,000; which due at the end of 7 months

2. P5,000 is borrowed for 75 days at 16% per annum simple interest. How much will be due at the end of
75days?

3. A loan was made 3years and ago 4 months at 6% simple interest. The principal amount of the loan has
just been repaid along with P800 of interest. Compute the principal amount of the original loan

4. A bank deposit of P4,000 was made one year ago in one of the local banks which pays monthly
interest. The bank account accumulates now to P4,392.60. Compute the effective annual interest rate.

5. If you borrowed P10,000 from a bank with 18% interest per annum, what is the total amount to be
repaid at the end of one year?

6. Find the present worth of a future payment of P100,000 to be made in 10 years with an interest of
12% compounded quarterly

7. By the condition of a will, the sum of P2,000 is left to a girl to be held in trust fund by her guardian
until it amounts to P50,000. When will the girl received the money if the fund is invested at 8%
compounded quarterly?

8. A man expects to receive P25,000 in 8 years. How much is that money worth now considering
interest at 8% compounded quarterly?

9. A student plan to deposit P1,500 in the bank now and another P3,000 for the next 2 years. If he plans
to withdraw P5,000 3years after his last deposit for the purpose of buying shoes, what will be the
amount of money left in the bank after one year of his withdrawal ? Effective annual interest rate is
10%.

10. The Phil. Society of Computer Engineers is planning to put up its own computer café . Two proposals
being considered are :

A. The renovation of the apartment now, to cost P400,000

B. The renovation of a smaller building now, to cost P300,000 and at the end of 5 years, an extension to
be added to cost P200,00

Which proposal is more economical, if interest rate is 20%,depreciation to be neglected and by how
much ?

11. Accumulate P300 for 9years at 6% compounded quarterly. What is the compound interest earned?
12. Two proposals are considered by a company for building a bottling plant, these are :

Proposal A:

The construction of a building now costing P500,000,000

Proposal B:

The construction of smaller building now costing P400,000,000 and an additional wing costing
P200,000,000 at the end of 10years.

Assuming depreciation to be negligible, which of the two proposals is more economical by how much if
interest is at 6%

13. What is the difference of the amount 3years from now for a 10% simple interest and 10%
compound interest per year?

14. If the effective interest rate is equal to 19.56%, compute the nominal rate if money is compounded
monthly.

15. Find the present worth of a future payment of P100,000 to be made is 5 years with an interest of
12% compounded quarterly

16. Find the nominal rate which if compounded quarterly is equivalent to 6.5% compounded semi-
annually

17. Compute the effective rate annual interest rate on a loan if the nominal interest rate is 16% per
annum compounded quarterly

18. Mr. Juan Dela Cruz borrowed P1,000.00 and was able to signed a promissory note that he would pay
P2,032.79 after 4years. How much is the nominal rate of interest and the corresponding effective rate if
money is compounded b-monthly

19. A manufacturing firm wishes to give each 80 employees a holiday bonus. How much is needed to
invest monthly for a year at 12% nominal interest rate, compounded monthly, so that each employee
will receive a P2,000.00 bonus?

20. A debt of P10,000 with 10% interest compounded semi-annually is to be amortized by semi-annual
payments over the next 5 years. The first due is 6 months. Determine the semi-annual payments

21. A man purchased on monthly instalment a P100,000 worth of appliance. The interest rate is 12%
nominal and payable in two years. What is the monthly amortization?

22. The cost of equipment is P500,000 and the cost of installation is P30,000. If the salvage value is 10%
of the cost equipment at the end of 5 years, determine the book value at the end of the fourth year. Use
SLM
23. A machine has an initial cost of P50,000.00 and a salvage value of P10,000.00 after 10years. What is
the SLM depreciation rate as a percentage of the initial cost ?

24. A machine has a first cost of P140,000 and a life of 8 years with a salvage value of P10,000 at the end
of its useful life. If the depreciation at the first year amounts to P35,000, what method is used in the
calculation of depreciation?

25. A company must relocate one of its factories in three years. Equipment for the loading dock is being
considered for purchase. The original cost is P20,000.00, the salvage value of the equipment after three
years is P8,000.00. The company’s rate of return on money is 10%. Determine the capital recovery rate
per year

26. LBC Express Corp. charges 1 ½ % interest per month, compounded continuously on the unpaid
balance purchases made on this credit card. Compute the effective rate of interest

27. Given that the discount rate is 11.5%, what is the equivalent uniform annual cash flow of the
following stream of cash flows?

Year 0 - P100,000

Year 1 - P200,000

Year 2 - P300,000

Year 3 - P135,000

28. The maintenance expense on a piece of machinery is estimated as follows. Maintenance for the 1st
year is P150, and increases by P150 every year until the fourth year. If interest is 8%, find the equivalent
uniform annual maintenance cost

29. A manufacturer purchased an appliance worth P15,000 with a useful life of 6years and a salvage
value of P2,000 at the end of its life. Assuming rate of interest to be 12%, compute the equivalent
uniform annual cost

30. A small shop in Bulacan fabricates threshers for palay producers in the locality. The shop can
produce each thresher at a labor cost of P1,800.00. The cost of materials for each unit is P2,500.00. The
variable costs amounts to P650.00 per unit, while fixed charges incurred per annum totals P69,000.00 If
the portable threshers are sold at P7,800.00 per unit, how many units must be produced and sold per
annum to break-even ?
MULTIPLE CHOICE:

1. A series of equal payments occurring at equal intervals of time

a. annuity b. debt c. amortization d. deposit

2. The quantity of a certain commodity that is offered for sale at a certain price at a given place and time
a. demand b. supply c. stocks d.goods

3. The worth of a property as recorded in the book of an enterprise

a. salvage value b. price c. book value d. scrap value

4. The capacity of a commodity to satisfy human want

a. luxuries b. discount c. utility d. necessity

5. The difference between the book value and actual lower resale value is
a. salvage value b. fixed value c. resale value d. sunk cost

6. Money paid for the use of borrowed capital

a. depletion b. discount c. interest d. overhead cost

7. The decrease in the value of property due to passage of time

a. salvage value b. depreciation c. depletion d. devaluation

8. Worth of the property as shown in the accounting record of an enterprise

a. market value b. use value c. book value d. capital

9.Cost of things that are neither labor or materials

a. construction cost b. expenses c. labor cost d. investment

10.The present worth of all depreciation over the economic life of the item
a. maintenance b. capital recovery c. depreciation recovery d. annuity