Republic of the Philippines

BATANGAS STATE UNIVERSITY

BatStateU Alangilan
Alangilan, Batangas City
College of Engineering, Architecture and Fine Arts
https://batstate-u.edu.ph/, Tel. No. (043) 425-0139 loc. 118/2121

Mentoy, Jan Jericho C.

ChE-2204
Chemical and Food Engineering Department

ENGG 404: Engineering Economics

Quiz I

GENERAL DIRECTIONS:
1. Answer all problem-solving type problems in a clean paper, preferably white.
2. If NONE of the choices is the correct answer, choose E.
3. Avoid rounding off during computations but only on final answers, up to four (4) decimal places.
4. Upload your .pdf file with complete solution at the end of the Google Form. It must be named as <Section-Surname,
F.N.-Q1-ENGG 404>. Example: 2201-de Guzman, M.-Q1-ENGG 404.pdf

I. Specific Direction: Choose the letter(s) of the correct answer(s).

1. In Engineering Economics, which among these is/are true about a discount? (2 pts.)
A. It is the difference between the future and present worth values.
B. Its discount rate will never be equal to the interest rate.
C. It is a year-end payment paid at the beginning.
D. It is the interest paid for every year-end payment.

2. The price of a product is expressed as �, PHP = 10 – 28� where � is the demand. Which of the following correctly
expresses the total revenue? (2 pts.)
A. 10 − 28�2 B. 28� = 10 C. 10� − 28� D. 10� − 28�2

3. In Plant Design, one is required to compute for one time-independent and one time-dependent market indicator.
Which of the following pairs will provide a better market analysis? (2 pts.)
A. Payback Period & Breakeven Point
B. Capitalized Cost & Payback Period
C. Discounted Payback Period & Annual Worth
D. Inflation Rate & ROI

4. How are you going to maximize a profit if the price is given as 3 – 25�? (2 pts.)
A. Differentiate the price, then multiply the demand and subtract the total costs. Set equal to 0.
B. Use the profit formula, then differentiate the total costs. Set equal to 0.
C. Subtract the total costs from total revenue then differentiate. Set equal to 0.
D. Differentiate the total price then subtract the total costs. Set it equal to 0.

5. In an investor’s perspective, which among these has the best potential for your money to grow, using the same
present amount? Assume compound interest methods. (2 pts.)
A. i = 3.67%, f = 1.16%, n = 20 years 3265
B. r = 25%, m = 3; n = 15 years
C. i = 4%, f = 2%, n = 18 years 2836
D. r = 15%, m = 2, n = 7 years

II. Specific Direction: Choose True if the statement is incorrect, otherwise False.

True 1. For any economy study based on our discussions, it is always necessary to determine the profit to evaluate the
better/best alternative. (2 pts.)

True 2. If simple interest is evaluated, then the interest obtained will always be directly proportional to the number of years
assuming that a constant interest rate is used throughout these years. (1 pt.)

True 3. The future worth of a perpetuity from one (1) to n years is undefined because as n approaches infinity, the value
becomes 0. (1 pt.)

False 4. Perpetuity is derived from the fact that the number of compounding periods approaches to infinity while the nominal
interest rate approaches to 0. This then lumps the expression into e. (1 pt.)
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
BatStateU Alangilan
Alangilan, Batangas City
College of Engineering, Architecture and Fine Arts
https://batstate-u.edu.ph/, Tel. No. (043) 425-0139 loc. 118/2121
False 5. The breakeven point always maximizes the profit. (1 pt.)

False 6. Selecting the best alternative always depends on the economy under study, rather than the total costs. (2 pts.)

False 7. If a certain present value P is amortized into 10 equal payments, then the future worth F will always be greater than
10 times the present worth for all values of i. (1 pt.)

True 8. A zero profit implies that this is a breakeven point, and the amount of demand equals the amount of supply. (2 pts.)

False
9. Inflation is the real reason why our country cannot just print more bills or produce money to pay our debts. (1 pt.)

False 10. A deferred annuity until n period of i interest, and A equal payments, can be compensated by paying A times
[F/A, i%, j + 1] on the j + 1 period. (1 pt.)

False 11. If an amortization schedule with A equal payments is done from 1 to � periods by paying at the end of every period,
then at any point � between 1 to �, the value of the money left upon withdrawing the lump sum from 1 to � is A times
[�/�, �%, � − �]. (1 pt.)

True 12. The capitalized cost is generally the sum of first cost and all operating costs accumulated in one year. (1 pt.)
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
BatStateU Alangilan
Alangilan, Batangas City
College of Engineering, Architecture and Fine Arts
https://batstate-u.edu.ph/, Tel. No. (043) 425-0139 loc. 118/2121

III. Specific Direction: Solve each item completely. Include your solutions in the .pdf file while writing the correct ones
on the space provided.

1. In the year 2020, the stock market fell because of COVID-19. You started investing from the year 2003, with an initial
capital of P50,000. The offer of the bank during this year stated “Earn 3.7% interest rate, compounded quarterly for
6 year!” From the accumulated amount after 6 years, P5,000 was liquidated due to placement fees, etc. The new
lump sum was further increased with the new interest rate offered by the bank and was planned to be the interest
rate forever. “Earn 4% interest rate, compounded semi-annually!” However, when the pandemic surged at the end
of 2020, the bank notified everyone that they will stick with the latest interest rate but will apply an inflation rate of
1.89% until the end of 2025. (15 pts.)

How much will the investor earn/lose by 2025?

Solution

 From 2003 - 2009 (t =6yrs)

F = P(1+r/n)nt
F= Php 50,000(1 + 0.037/4)6x4
F= Php 50,000.00(1 + 0.00925)24
F = Php 62364.89541

 Liquidation

F2 = Php 62364.89541- Php 5000

F2 = Php 57364.89541

 Until 2020 (t =11 yrs)

F3 = P(1+r/n)nt
F3= Php 57364.89541(1 + 0.04/2)2x11
F3= Php 57,364.90(1 + 0.02)22
F3 = Php 88684.96211

 From 2021-2025 (t=5yrs) f=1.89 %

F4= P (1+i)nt
(1+f)t
F4= Php 88684.96211 (1+ 0.02)2x5
(1+0.0189)5
F4= Php 98445.05167

F=Php 98445.0517
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
BatStateU Alangilan
Alangilan, Batangas City
College of Engineering, Architecture and Fine Arts
https://batstate-u.edu.ph/, Tel. No. (043) 425-0139 loc. 118/2121

2. Below is a year-end cash flow diagram in dollars, deferred in some years. MARR = 2.7% Find the value of the
arrow indicated. (15 pts.)

X = 20 000( F/A, 2.7%,3)(F/P, 2.7%,3) + 40 000 (F/A, 2.7%,2)(F/P, 2.7%, 1) + 30 000 (P/F,2.7%, 2) + 10 000
X= 20 000 ((1+0.027)3-1)(1+0.027)3 +40000 ((1+0.027)2-1)(1+0.027) + 30000(1+0.027)-2 + 10000
0.027 0.027
X = 66,762.98895989790 + 83269.1599999997 + 28,443.32525226860 + 10000
X= 188,475.4742121660

X=188,475.4742

3. The PH debt as of today amounts to 12 trillion. This balloons with an interest rate of 0.16% yearly. Suppose the
government requires every earning individual to pay the debt by 2030, how much each of us would need to pay
monthly (annual payment amortized in 12 equal payments), assuming that inflation is 3%, the interest rate is 5.6%
compounded daily, and we will start the payment by the end of 2022? The Philippines is estimated to have 110
million people, with the work force of around 20%. (15 pts.)

No. of Working Filipinos Paying the Debt

No.of Filipinos = 110,000,000 X0.20

No of Filipinos = 22,000,000

Future Value of Debt at 2030 (I=0.16%)

FV= P(1+rt)
FV=12,000,000,000,000 (1+(0.0016x8))
FV = 12,153,600,000,000.00

Calculate the interest rate within a year with 12 payment at i=5.6 %, compounded daily
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
BatStateU Alangilan
Alangilan, Batangas City
College of Engineering, Architecture and Fine Arts
https://batstate-u.edu.ph/, Tel. No. (043) 425-0139 loc. 118/2121
(1 +r/m)mn = (1+i)mn
(1+ (0.056/365))365 = (1+i)12
1.057593141 = (1+i)12
i=0.004677212894

Calculate the present value needed

F= P (1+i)nt
(1+f)t
12,153,600,000,000.00 = P (1+ 0.004677212894)12x8
(1+0.03)8
12,153,600,000,000.00= P(1.235524058961)
P= 9,712,477,804,833.470

Payment every month combined

A= i(1+i)n * P
(1+I)n -1
A = 0.004677212894(1+0.004677212894)12x8 * 9,712,477,804,833.470
(1+0.004677212894)12x8-1

A= 125,811,902,288.5150

Payment monthly of every working Filipino

A = 125,811,902,288.5150/ 22,000,000
A=5,718.722831296120
A= 5.718.7228

Prepared by:

Engr. Monroe H. de Guzman, AAE

Lecturer, Engg 404

Noted by:

Engr. Mary Rose F. Persincula

ChE-FE Department Head

Approved by:

Dr. Reynato A. Gamboa

Dean, CEAFA