MIDTERM EXAM

GROUP NUMBER: 8

MEMBERS:

Villanel, Trixie
Velez Jr, Jonax
Victorillo, Jhon Ulysses
Yasser, Zein Ali

A. INTERNET SEARCH (20 points)

Read an article from Wall Street Journal (https://www.wsj.com/) and identify a business news using one of the
categories - (1) new products or product expansion, (2) equipment and process selection, (3) cost reduction. (4)
equipment replacement or (5) service or quality improvement. And give examples that illustrate one of the four
fundamental principles of engineering economics.
New product or product expansion of UBER IMPOSES NEW COSTUMER FEES TO OFFSET GAS PRICES.

DEVELOP THE ALTERNATIVES

The price of the gas should low so that the fees of all transportation will not increase. If ever the price of the gas will get
increase its better not that much. So that the all fees will be stable.
B. PROBLEM SOLVING (40 points)

1. At what annual interest rate will $1,200 invested today be worth $2.500 in 12 years?

2. Which of the following alternatives would you rather receive, assuming an interest rate of 8% per year?
Alternative 1: Receive $100 today:
Alternative 2: Receive $120 two years from now
3. You are interested in buying a piece of real estate property that could be worth $450,000 in five years. If your
earning interest rate is 5%, how much would you be willing to pay for this property now?

4. You want to save the down payment required to purchase a vacation home at the end of five years. If the required
down payment is $25,000 and you can earn 5% a year on your savings account, how much do you need to set
aside at the end of each year for the next four years?
5. If you borrow $20,000 at an interest rate of 8%, per year with the following repayment schedule, what is the
required amount A?

6. If you want to withdraw $20,000 at the end of two years and $55,000 at the end of four years, how much should
you deposit now into an account that pays 12 % interest compounded annually? See the accompanying cash flow
diagram.
7. You plan to make 15 annual deposits in a saving account that pays 6% interest per year. If the first deposit of
$1,200 is made at the end of the first year and each subsequent deposit is $400 more than the previous one, the
value of the account at the end of 15 years will be ________.
8. Compute the value of P for the accompanying cash flow diagram. Assume i = 6% per year.
C. PROBLEM SCENARIO CREATION (20 points)

State a scenario you experienced that is an example of the following gradients and compute for their present
worth. Feel free to make your estimations on the amount.

a. Geometric Gradient

The tuition fee in a school are expected to inflate at the rate of 5% per year and the tuition of year 1 is
Php80, 000. The parents are then given a financial planning by the bank that says they must deposit an
amount of money that will cover for their child’s whole 4-years education. If the amount deposited has an
interest rate of 3% per year compounded annually, how much money must be deposited to the bank today?
b. Arithmetic Gradient

Uncle Jerry want to buy a new machine for his farming, he also wants to set aside enough money in bank
account in order to pay the maintenance of the machine for the first 5 years. How much money does he need
to depost now in the bank in order to pay the expenses? Assume I = 5%.