Concepts 1. Fora fixed amount, F that is received at the end of year n the A equivalent increases as the interest rate increases. TRUE 2. CFD are analogous for FBD for mechanic problems. FALSE 3. Break-even point is the point where revenue equals the total of all expenses TRUE 4. A future worth(computed at the MARR) greater than zero for a project guarantees that interest in excess of the MARR has been realized by the project TRUE Simple interest ignores the time value of money principle FALSE . the book value of a depreciable asset is that amount which has been charged off as a depreciation expense FALSE, . Material cost is considered from var cost. TRUE 8. Cost concepts stich as variable, fixed, mixed, direct and indirect apply only to manufacturers not to service FALSE. 9. Cash flow include depreciation FALSE (dep has no effect in cash flow) 10.An annuity where first payment is made several periods after beginning — DEFERRED 11. Series of equal payment ANNUITY 12.Mutually Exclusive TRUE 13.An annuity made at the beginning of each period. ANNUITY DUE. 14.IRR method is also called as Investors Method 15.The amount of money to be paid for the use borrow capital INTEREST 16.In a mutually exclusive TRUE 17.Interest that is earned on prior COMPOUND INTEREST 18.Series of payment increase or decrease GRADIENT 19.Worth of property on acc records BOOK VALUE, 20. Study of economic problems ENGINERRING ECO 21 Interest is based on the original amount of loan SIMPLE INTEREST oe x(WITH PICTURE) 1. Fixed expenses do not change in total when there is modest change in sales TRUE 7. A value-added activity is one that enhances the perceived value of the product or service to the customer TRUE 8. **Interest is money paid for the use of equity capital FALSE - CHECK ON LECTURES 10. $1791, 10 years from now is equivalent to $900 if the interest rate equals 8% per year. FALSE, 12. Break-even analysis is useful for companies that sell products, but is not useful for companies that provide services. FALSE 16. It is the series of equal payments at equal interval of ime. ANNUITY 17. It calculates the number of years required for cash inflows to just equal cash outflows. PAYBACK PERIOD METHOD 18. Money paid for the use of borrowed capital INTEREST 19. The decrease in the value of physical property due to the passage of time. DEPRECIATION 20. The process of determining whether an engineering project is to be undertaken or modified with the objective of obtaining the best utilization of capital resources taken into account some pertinent facts. ENGINEERING ECONOMY 21. Interest that is based on the original amount of the loan. SIMPLE INTEREST Problem Solving 1. The officers of the International Leather Company is considering building a plant in Manila costing P2,250,000. At the end of 12 yrs, the plant can be sold for P500,000. Itis estimated that sales will be P1,000,000/yr and that the labor would cost annually 100,000 and overhead would be P55,000. Taxes and insurances would be 3% of the first cost. If MARR is at least 20%., a, What is the rate of return (ROR)? 32.6 Al = 1,000,000 AC = Labor cost + overhead + taxes and insurance AC = 100,000+55,000+(0.03x2,250,000) = 222,500 Depreciation = (FC-SV) / { [(1+i)*n-1] /i} Depreciation = 44,213.68858 FC = 2,250,000 SV = 500,000 n=12 i= 20% = 0.20 Capital Invested = 2,250,000 Computed: ROR = [Al - (AC+D)] / Capital ROR 11,000,000 - (222,500+44,213.68858/] / 2,250,000 = 32.59% ROR > MARR ; FEASIBLE 32.59% > 20% b. Compute the project's IRR by Present Worth using 15% and 35%. @. 32.3 b. 34.5 c. 33.4 4/3516 Computed: @i= 20% ; NPV= 1,257,569.331917 @i= 15% ; NPV= 2,057,984.84662578 @i= 35% ; NPV= -75,548.266983. An engineering project analyst is contemplating a 3 year project which require an initial investment for equipment of $85,000. It is anticipated that, if no inflation, annual revenues from the project will be $60,000 and annual cash expenses will be $25,000. Market value is $45,000 at the end of 3 years. MARR 10%, Payback period? (1.14 years: FC= 85,000 Al= 60,000 AC= 25,000 SV= 45,000 i= 10% n=3 PP = (FC - SV)/(Al-AC) = 1.142857 1.14 <3; FEASIBLE 4, An engineering project analyst is contemplating @ 3 year project which require an initial investment for equipment of $85,000. It is anticipated that, if no inflation, annual revenues from the project will be $60,000 and annual cash expenses will be $25,000. Market value is $45,000 at the end of 3 years. MARR 10% What is the NPV? 35,849 5. An engineering project analyst is contemplating a 3 year project which require an initial investment for equipment of $85,000. It is anticipated that, if no inflation, annual revenues from the project will be $60,000 and annual cash expenses will be $25,000. Market value is $45,000 at the end of 3 years. MARR 10% ‘Compute the IRR by Present Worth using 5% and 30%, 29% i = 5% ; NPV= 49,186.372962i= 30% ; NPV= -953.573054 IRR = 0.2952); FEASIBLE 6. MARR, 201% B A 24,00 30, First 0 000 Cost 13 Power 1,300 60 11,60 9,3 Labor 0 20 Mainte 19 n 2,800 00 Ance Taxes & 3% 3% Insuran c E Life, 5 5 Years Compute for IRR 44% C04: Increment Value:FC= 24,000-30,000 = 6,000 AE(A)= 1300+11600+2800+(0.03x24000) = 16,420 ; wio 0.03 = 15,700 AE(B)= 1360+9320+1900+(0.03x30000) = 13,480 ; wo 0.03 = 12,580 AE(A-B)= 2,940 ; 3,120 n= Syears. (INCOMPLETE QUESTION) NO MARR 7. Mr Jones plans a deposit of $500 at the end of each month for 10 years at 12% interest compounded monthly. What will be the amount in 2 years? 8, Today, a man borrowed money to be paid in 10 equal payments for 10 quarters. If the interest rate is 10% compounded monthly and the quarterly payment is P2000. How much did he borrow? 17,504.13 9. Aman may take $50,000 cash on 10 equal monthly payments on a life insurance policy, where the first payment is to be made immediately. What is the monthly payment if money is worth 3% compounded monthly? 5069.07, P= 50,000 nim= (10)(12) = 120 = 3% .03/12 = 0.0025 iba sagot ko sa sagot ni bryan10. Clark and Leah owes 25,000 due at the end of one year and another 25,000 due at the end of 5 years. They agree to pay 35,000 on the second year and the remaining balance a year after their first payment. How much must they pay for their second payment if money is worth 5% compound semi annually. 11. What uniform annual amount should be deposited each year to accumulate 100,000 at the end of the Sth annual deposit if money earns 10%.interest? 12. If you want to withdraw $20,000 at the end of 2 years and $55,000 at the end of 4 years, how much should you deposit now into an account that pays 12% compounded ser ue 13. | am setting up a fund for my son to go to college. | figure that he will need $50,000 by the time he is old enough to go to college. | found an account that pays 5.75% compounded monthly. How much will my monthly payment be to get my son set up for college in 17 years? $145.06 How much interest will the account accrue? 20,407.76 14. If $25,000 is deposited now into a savings account that earns 6% per year, what uniform annual amount could be withdrawn at the end of each year for 10 years so that nothing would be left in the account after the 10th withdrawal? Used formula for annuity due; my answer is 3,204.4298 ; but not sure 15. An independently owned moving company wants to have enough money to purchase a new tractor trailer in 4 years. If the unit will cost 250,000, how much should the company set aside each year if the account earns 10% per year? 16.A man brought an equipment costing 60,000 payable in 12 quarterly payments,each installment payable at the beginning of each period. The rate of interest is 24% compounded quarterly. What is the amount of each payment: 17. If 10,000 is deposited each year for 9 years, how much annuity from the bank every year for 8 years starting 1 year after the 9th deposit is made. Cost of money is 14%, 18. You deposit $4,000 today, $5,000 one year from now, and $7,000 three years from now. How much money will you have at the end of year three if there are different annual compound interest rates per period of 4%, 8%, and 12% respectively? #4- cash flow diagram notes F3= 13,466.8367 (not sure) 19, What is the accumulated amount of the five year annuity paying P6,000 at the end of each year, with interest at 15% compounded annually? Ordinary annuity formula 20. Determine the present worth of an annuity consisting of 6 payments of $12,000 each, the payment are made at the beginning of each year. Money is worth 15% compounded monthly. a, $69,814 <- sagot ko (I used annuity due formula) $44;123,29<- sagot ni bryan 21. The officers of the International Leather Company is considering building a plant in Manila costing P2,250,000. At the end of 12 yrs, the plant can be sold for P500,000. It is estimated that sales will be P1,000,000/yr and that the labor would cost annually 100,000 and overhead would be P55,000. Taxes and insurances would be 3% of the first cost. If MARR Is at least 20%., What is the net present value (NPV) of the project?22. If money is worth 16%, m = 2 find the single payment which would replace the following obligations at the end of 3 years, if $25,000 due at the end of 2 years and P15,000 due at the end of 2 % years. 45,360 23. A $20,000 loan was originally made at 8% simple interest for 4 years. At the end of this period the loan was extended for 3 years with the new interest rate at 10% compounded quarterly. How much should the borrower pay at the end of 7 years? 24, What is the present worth of a 3 years annuity paying P3,000 at the end of each year, with interest at 8% compounded annually? 25. If you borrow $9,000 and agree to repay the loan in six equal semi-annual payments at an interest rate of 10% annually, what will the payment be? 1773.16 Iba sagot Ko- recompute again 26. A person deposit $6000 per year into a retirement account which pays interest at 8% per year. The amount of money in the account at the end of 30 years is (ordinary annuity formula) 27. Money borrowed today is to be paid in 6 equal payments at the end of 6 quarters. If the interest is 12% compounded quarterly, how much was initially borrowed if a quarterly payment is P2,000? 10,834 28. If A=P5,000, G=P400, and n=6, then i=15%; P, = 29, Money is to be put into account in four equal deposits at the end of 4 quarters. If the interest is 4% compounded quarterly, how much will be accumulated if the quarterly deposit is 4,000. 30. An engineering project analyst is contemplating a 3 year project which will requirean initial investment for equipment of $85,000. It is anticipated that, if there is no inflation, annual revenues from the project will be $60,000 and annual cash expenses will be $25,000. It is estimated that the left-over equipment will have a market value of $45,000 at the end of three years. Using an MARR of 10%, What is the rate of return of the... 27% 31. A debt of 5000, which was due 5 years from now, instead of going to be repaid by three payments: 2000 now, $1000 in 2 years time and the third payment after 4 years What will be the final payment if the assumed interest rate is 6% per annum compounding hatt-yearly? "1064 32. You are preparing to buy a vacation house five years from now. The home will cost $100,000 at that time. You plan on saving three deposits at an interest rate of 10%: 0 Deposit 1: Deposit $12,000 today 0 Deposit 2: Deposit $15,000 two years from now. 1 Deposit 3: Deposit $x three years from now. How much do you need to invest in year three to ensure that you have the necessary funds to buy the vacation home at the end of year tive? (Ans. $80,173) 33. A project is expected to generate a cash flow of 8000 in year 1, 2000 in year 2 and 5000 in year 3 (correct based on online quiz score) 34, Determine the capitalized cost of a research laboratory which requires 5,000,000 for original construction; P100,000 at the end of every year for the first 6 years and then P120,000 ech year thereafter for operating expenses, and P500,000 every 5 years for replacement of equipment with interest 12% per year 6,573,646 35. You want to start saving for your 10-year old son's college education. If you were guaranteed 6% interest compounded quarterly, how much would you have to save per Month to amount to P12,000 by the time he is 18? 98 36. A person buys a piece of lot for 100,000 downpayment and 10 deferred semi-annual payments 8,000 each, starting 3 years from now. What is the present value of the investment if the rate of interest is 12% compounded semi-annually.37. | will invest 500 per quarter for my retirement at 7.3% compounding quarterly for 32 years. | have a choice of making that payment of 500 at the beginning of the quarter. How much money will | have at the end of 32 years. 254,543.36 38. A businessman borrowed 10,000 with interest at the rate of 5% payable annually. The debt will be paid, principal and interest included by equa installments at the end of each year for 3 years. Compute the annual payment 39. Aman paid 10% down payment of P200,000 for a house and lot and agreed to pay the 90% balance on monthly installments for 60 months at an interest rate of 15% compounded monthly. Compute the amount of the monthly payment 40. ordinary interest amount due if P3,000,000 was invested at 12.5% for the period from May 20 to Aug 8 84,375 41, You are considering investing in a 5-yr CD (certificate of deposit) with an annual yield of 6.5% and monthly compounding. If you invest $5,000, your effective interest earned is most nearly 6.7% 42, What is the accumulated amount after 5 years of P2,000 invested at the rate of 10% per year compounded bi-monthly? 3,294 43. 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 3 years 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%. 44, Aman purchased on monthly installment a P100,000 worth of land. The interest rate is 12% nominal and payable in 20 years. What is the monthly amortization? 45. Find the exact leap year interest amount due if 3000 was invested at 12.5% for theperiod from May 20 to Aug 8 82,192 46. Find the ordinary interest amount due if 3,000,000 was invested at 12.5% for the period from May 20 to Aug 884,375. 46. If you borrow $9,000 and agree to repay the loan in six equal semi-annual payments at an interest rate of 10% annually, what will the payment be? 1653.75 48. 1000 $1,000 1850 49. A bridge with initial cost of P50,000,000 has a life of 20 years. The bridge must be partially re-built at the end of each 20 years at a cost of P:10,000,000. It will have an annual operating cost of P1,000,000 for the first 10 years and P500,000 thereafter. At 6% annual interest; Determine Case II Capitalized Cost 50. Recent technology has made possible a computerized vending machine that can grind coffee beans and brew fresh coffee on demand. The computer also makes possible such complicated functions as tracking the age of an item and then moving the Oldest stock to the front of the line, thus cutting down on spoilage. Easy Snack Inc. hasestimated the cash flows in thousands of dollars over the products's six-year useful life, Including the initial investment, as follows: Compute for the ERR if MARR is 18%. 33% Using 20% and 65% annual interest rates, what is the IRR for this investment? 61.7% 51. In 1739, Gregory Smith sold the Kohinoor diamond to Queen Victoria for 34. If he saved just 5 from the proceeds in a bank account that paid a 6% annual interest, how much would the descendants have in 2020? 41411521879 52. Telephone switchboard 100 pair cable can be made up with either enameled wire or tinned wire. there will be 400 soldered connections. the cost for soldering a connection on the enameled wire will be P1.65, on the tinned wire it will be P1.15. a 100-pair cable made up with enabled wire cost P0.55 per lineal foot and those made up of tinned wire cost P0.75 per lineal foot. Determine the length of cable run in ft. so that the cost of each installation would be the same. Determine the length of cable at which each alternative is more economical. 1000 53. A manufacturing firm maintains one product assembly line to produce signal generators. weekly demand for generators is 35 units. the line operates for 7 hours per day. 5 days per week. what is the maximum production time per unit in hours required of the line to meet demand, 54, a man expects to receive P25,000 in 8 years. how much is that money worth now considering interest at 8% compounded quarterly? 13265.83 = 13266 - compound I. 55. kathy buys a television set from a merchant who asks P1,250 at the end of 60 days (cash in 60 days). kathy wishes to pay immediately and the merchant offers to compute the cash price on the assumption that money is worth 8% simple interest. what is the cash price today? 56. a proposed project is estimated to have the following cash flow, at 7% MARR: $1500 $1500 $1500 $1500 oi pf pS js 6 7 8 what is the future worth of the project (round off answer to whole number) 3885 57. the officers of the international leather company is considering building a plant in metro manila costing 2,250,000. at the end of 12 years, the plant can be sold for 500,000. it is estimated that sales will be 1,000,000 per year and that labor wouldcost annually P100,000 and overhead would be P55,000. taxes and insurance would be 3% of the first cost. if MARR ia at least 20%. what is the rate of return of the metro manila plant project? 34.5% Compute the project's IRR by PW using 15% and 35% rates? 34.29% >>> 34.5% What is the ERR of the project? 16% 58. Mr. Perez loaned P200,000 from a bank to expand his business. a quarterly interest of P7,700 must be paid every 3 months and the entire principal of P200,000 will be repaid in 4 years. what is the nominal annual interest paid by Mr. Perez? 59, determine the present worth of an annuity consisting of 6 payments of $12,000 each, the payment are made at the beginning of each year. Money is worth 15% compounded monthly. 60. a person deposit $6000 per year into a retirement account which pays interest at 8% per year. the amount of money in the account at the end of 30 years is. 679699 61. 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% compounded semi-annually? 62. how much money must you invest today in order to withdraw P2000 annually for 10 years if the interest rate is 9%? 63. a loan of P5000 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? 5937.50 64, alternative methods | and II are proposed for a plant operation. Determine which alternative is economical if MARR is 20%. using the future equivalent worth method, the better alternative is Method Il amounting 10 52442,65. what uniform annual amount should be deposited each year in order to accumulate 100,000 at the end of the 5th annual deposit if money earns 10% interest? 16379.75 = 66. if you borrowed money from your friend with simple interest of 12%, find the present worth of P20,000, which is due at the end of nine months. 18348,60 67. how much money must be invested on Jan. 1, 1998 in order to accumulate P2,000 ‘on Jan. 1, 2003. Money is worth 6%. 1494.52 68. what is the accumulated amount after 5 years of P2,000 invested at the rate of 10% per year compounded bi-monthly? 3284 69. A fully secured loan of P30,000 was to be amortized by 10 equal semi-annual payments, the first to be made 6 months after the loan finalization. After the 6th payment was made by the debtor was in a position to settle the entire debt balance by a single payment on that date. If the interest on the loan is 12% compounded semi- annually, what be the amount of the single payment? 15,437 14,124 13,488 16,935 70. The XYZ company is contemplating the purchase of a new milling machines. The purchase price of the new machine is P60,000 and its annual operating cost is 2,675.40. The machine has a life of 7 years, and it is expected to generate P15,000 revenues in each year of its life. Should the company acquire a new milling machine? The company expects to eam not less than 20%. A. The payback period is: 4,87 years B. The Net present value (NPV) is: -15,574.84 or -15,575 71. if money is worth 16%, m=2 find the single payment which would replace the following obligations at the end of 3 years, if $25,000 due at the end of 2 years and 15,000 due at the end of 2 % years. $45360 72, the amount P50,000 was deposited in the bank earning an interest of 7.5% per annum. determine the total amount at the end of 5 years. if the principal and interest were not withdrawn during the period? 7178.4773. Consider the accompanying cash flow series at varying interest rates. what is the equivalent present worth of the class flow series? P= 4,745 $1,800 $1200 siz00 $1200 74, you invested $100,000 in a project and received $40,000 at 1. $40,000 at n= 2, and $30,000 at n = 3 years. you need to terminate the project at the end of year 3. your interest is 10%; what is the project balance at the time of termination? loss of 10700 75. a nominal interest of 3% compounded continuously is given on the account. what is the accumulated amount of P10,000 after 10 years? 13,499. 76. If A= P5,000, G= P400, and n = 6, then i= 15%; Pa=? Accompany must relocate one of its factories in 3 years. Equipment for the loading dock is being considered for purchase. The original cost is P20,000 the salvage value of the equipment after three years is P8,000. The company's rate of return (i) on money is 10%. Determine the capital recovery rate per year. 5625 XYZ Corporation manufactures book cases that it sells for P65 each. It costs them 35,000 per year to operate its plant. This sum includes rent, depreciation charges on equipment and salary payments. If the cost to produce one bookcase is P50, how many cases must be sold each year for XYZ to avoid taking a loss? 2334 units 77. Maria deposits $2,000 in a savings account that pays interest at an annual compound rate of 3%. Two years after the deposit, the interest rate increases to 4% compounded semi-annually. A second deposit of 3,000 is made immediately after the interest rate changes to 4%. How much will be in the fund 7 years after the second deposit? (round your answer to whole numbeR) 6172 79. A fully secured loan of P30,000 was to be amortized by 10 equal semi-annualpayments, the first payment to be made 6 months after the loan finalization. After the 6" payment was made the debtor was in a position to settle the entire debt balance by a single payment on that date. If the interest on the loan is 12% compounded semi- annually, what be the amount of the single payment? 80. You are considering a new punch press machine. This machine will have an estimated service life of 10 years. The expected salvage value at the end of service life will be 10% of the purchase cost. Its annual operating cash flows are estimated to be $60,000. if you can purchase the machine at $208,758 land MARR is set at 10%, what is the expected rate of return (ROR) on this investment? 115% ‘81 You loan from a loan firm an amount of P'100,000 with a rate of simple interest of 20%, but the interest was deducted from the loan at the time the money was borrowed Ifat the end of one year, you have to pay the full amount of P100,000, what is the actual rate of interest? 25% 82. An item is purchased for P100,000. Annual cost is P18,000. Using an interest rate of 8%, what is the capitalized cost of perpetual service? 325,000 83. long will it take money to double if invested at 5% compounded-annually? 14 years 84. A debt at 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 1,295, 85. A newly-built business property, containing a space for a store and two offices, can be purchased for $1,200,000. A prospective buyer estimates that during the next 10 years he can obtain annual rental $458,460 from the property, and the annual out-of- pocket expenditure will not exceed $60,000. He believes that he should be able to dispose of the property at the end of 10 years at not less than $ 700,000. Annual taxes and insurance will total 2.5.% of the first cost. Assume he has efficient capital to purchase the property, and that the minimum attractive retum (MARR) he is obtaining from his capital is 20%. How much is the excess of the cash flow using the Annual Worth Method? Round off answer to whole number.inflow = 458460 x 10 = 4,584,600 ‘outflow = 60,000 + 700,000 + (1,200,000 * 2.5%) = 790,000 excess = inflow - outflow = 3,794)600 86. The pian was to leave $5,000 on deposit in a savings account for 15 years at 6.5% interest compounded annually. It became necessary to withdraw $1,500 at the end of the 5th year. How much will be on deposit at the end of the 15-year period? (round to. whole number) $10,043 87. Find the net present worth of the following cash flow series at an interest rate of 8% End of Period Cash Flow 0 -$1,000 1 -2,000 2 3,000 3 4,500 4 1,500 88. An industrial engineer wishes to accumulate a total of P10,000 in a savings account at the end of 10 years. If the bank only pays only 4% compounded quarterly, what should be the initial deposit? P6,716.53, 89. An investment option is available with continuous compounding at 5% interest. If you invest $8000 now, how much interest income will you ear if you cash out 3.5years. 1,530 90. If P5,000 shall accumulate for 10 years at 8% compounded quarterly. Find the compounded interest at the end of 10 years. P6,040. 91. What is the corresponding effective interest rate of 18% compounded semi- quarterly? 19.48% 92. A loan of $10,000 is made today at an interest rate of 15% and the first payment of $3,000 is made 4 years later. The amount that is still due on the loan after the first payment is most nearly, $14,500 93. A bridge with initial cost of P50,000,000 has a life of 20 years. The bridge must be partially re-built at the end of each 20 years at a cost of P.10,000,000. It will have an annual operating cost of P1,000,000 for the first 10 years and P500,000 thereafter. At 6% annual interest; Determine Case | Capitalized Cost 59,658,254 94. A proposed project is estimated to have the following cash flow, at 7% MARR: A proposed project is estimated to have the following cash flow, at 7% MARR: $1500 $1500 $1500 $1500 0 ? 2 @ |@ 5 6 7 8 | $600 $500 » $700 $800 $900 What is the Net Present Value of the project? (Round off answer to whole number)| pray that | would pass this exam and go on to new things with you. Thank you for your peace and your love in my life, Thank you for your kindness and care for me. Amen. hitpsi//www.academia edu/26967203/Engineering-Economy - for concepts din ‘A P4,000 is borrowed for 75 days at 16% per annum simple interest. How much will be due at the end of 75 days? P5,213.33 4,544.35 P5,102.44 If you borrow $9,000 and agree to repay the loan in six equal semi-annual payments at an interest rate of 10% annually, what will the payment be? What is the present worth of a3 years annuity paying P3,000 at the end of each year, with interest at 8% compounded annually? If you borrowed money from your friend with simple interest of 12%, find the present worth of 20,000, which is due at the end of nine months. P18,405.80 28,580.58 P19,410.84 ‘A newly-built business property, containing a space for a store and two offices, can be purchased for $1,200,000. A prospective buyer estimates that during the next 10 years he can obtain annual rentals of at least $458,460 from the property, and the annual out-of-pocket expenditure will not exceed $60,000. He believes that he should be able to dispose of the property at the end of 10 years at not less than $700,000. Annual taxes and insurance will total 2.5% of the first cost. Assume he has sufficient capital to purchase the property, and that the minimum attractive return (MARR) he is obtaining from his capital is 20%. How much is the excess of the cash flow using the Annual Worth Method? Round off answer to whole number. 3794600 What is the accumulated amount of the five year annuity paying P6,000 at the end of each year, with interest at 15% compounded annually?The plan was to leave $5,000 on deposit in a savings account for 15 years at 6.5% interest compounded annually. it became necessary to withdraw $1,500 at the end of the Sth year. How much will be on deposit at the end of the 15-year period? (Round off answer to whole number) Determine the present worth of an annuity consisting of 6 payments of $12,000 each, the payment are made at the beginning of each year. Money is worth 15% compounded monthly. $52,226 $61,752 $43,635 Mr. Jones plans a deposit of P500 at the end of each month for 10 years at 12% interest ‘compounded monthly. What will be the amount in two years? An independently owned moving company wants to have enough money to purchase a new tractor-trailer in 4 years. If the unit will cost $250,000, how much should the company set aside each year if the account earns 10% per year? Mr. Perez loaned P200,000 from a bank to expand his business. A quarterly interest of P7,700 must be paid every 3 months and the entire principal of P200,000 will be repaid in 4 years. What is the nominal annual interest paid by Mr. Perez? 16% 15.4% 13.5% You deposit $4,000 today, $5,000 one year from now, and $7,000 three years from now. How much money will you have at the end of year three if there are different annual compound interest rates per period of 4%, 8%, and 12% respectively? 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% compounded semi-annually? Today, a businessman borrowed money to be paid in 10 equal payments for 10 quarters.If the interest rate Is 10% compounded monthly and the quarterly payment is P2,000 how much did he borrow? | am setting up a fund for my son to go to college. | figure that he will need $50,000 by the time he is old enough to go to college. | found an account that pays 5.75% compounded monthly. How much will my monthly payment be to get my son set up for college in 17 years? What is the present worth of a 3 year annuity paying P3000 at the end of each year, with interest at 8% compounded annually? A proposed project is estimated to have the following cash flow, at 7% MARR: $1500 $1500 $1500 $150¢ $900 ‘Nhat the Future Worth of the Project? (Round off answer to whole number) What is the future worth of the project? (Round off answer to whole number) What uniform annual amount should be deposited each year in order to accumulate P100,000 at the end of the 5" annual deposit it money eams 10% interest? ‘A person deposit $6000 per year into a retirement account which pays interest at 8% per year. The amount of money in the account at the end of 30 years is ‘Anew boiler was installed by a textile plant at a total cost of P200,000.00 and projected to have a useful life of 15 years. At the end of its useful life, it is estimated to have a salvage value of 30,000.00. Determine its capitalized cost if interest is 18% compounded annually. 322,406.00432,564.12 P561,234.16 Ben deposits $5,000 now into an account that earns 7.5% interest compounded quarterly. He then deposits $1,000 at the end of the 1st year and 2,000 on the 2nd year. How much will the account contain 10 years after the initial deposit? (Round off answer to whole number) If $25,000 is deposited now into a savings account that earns 6% per year, what uniform annual amount could be withdrawn at the end of each year for 10 years so that nothing would be left in the account after the 10th withdrawal? A newly-built business property, containing a space for a store and two offices, can be purchased for $1,200,000. A prospective buyer estimates that during the next 10 years he can obtain annual rentals of at least $458,460 from the property, and the annual out-of- pocket expenditure will not exceed $60,000. He believes that he should be able to dispose of the property at the end of 10 years at not less than $700,000. Annual taxes and insurance will total 2.5% of the first cost. Assume he has sufficient capital to purchase the property, and that the minimum attractive return (MARR) he is obtaining from his capital is 20%. ‘What is the Rate of Return of the Investment (in 9)? Cvesvon 18 (ecm so ow A proposed project is estimated to have the following cash flow, at 7% MARR: $1500 $1500 $1500 $1500 - nN ato Net Pas a the poet Round newer woe net A loan of $3,000 was made at 99% simple interest. How long would it take in years for theamount of the loan and interest to equal $4,290? 43yrs 4.0 yrs toys ‘Aman may take $50000 cash or 10 equal monthly payments on a life insurance policy, where the first payment is to be made immediately. What is the monthly payment if money is worth 3% ‘compounded monthly? Maria deposits $2,000 in a savings account that pays interest at an annual compound rate of 39%. Two years after the deposit, the interest rate increases to 4% compounded semi-annually. A second deposit of $3,000 is made immediately after the interest rate changes to 4%. How much will be in the fund 7 years after the second deposit? (Round off answer to whole number) If $10,000 is deposited each year for 9 years, how much annuity can a person get annually from the bank every year for 8 years starting 1 year after the 9” deposit is made? Interest is 14%. $33,872 $31,731 $22,399 If P5,000 shall accumulate for 10 years at 8% compounded quarterly. Find the compounded interest at the end of 10 years. Tom's retirement account in a company currently totals $416,384. What perpetual income can Tom and his heirs receive per year if he retires now and the money is invested in an annuity earning 6% interest? $20,980 $26,980 $22,980 ‘A man bought an equipment costing P60,000 payable in 12 quarterly payments, each installment payable at the beginning of each period. The rate of interest is 24% compounded quarterly. What is the amount of each payment? Mr. James Louvay owes $25,000 due at the end of 1 year and $75,000 due at the end of 4years. He agrees to pay $50,000 today and the balance in two years. How much must he pay at the end of two years if money is worth 5% compounded semi-annually? 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 bonus? ‘P12,616 (exact: 12,615.81) P12,609 P12,591 12,200 Consider the accompanying cash flow series at varying interest rates. What is the equivalent present worth of the class flow series? $1,900 $1,200 | i200 © $1,200 &% Consider the accompanying cash flow series at varying interest rates. What is the equivalent Present worth of the class flow series? 474s-atin 1850 — kanila 5,182.06 - kay webb An item is purchased for P100,000. Annual cost is P18,000. Using an interest rate of 8%, what is the capitalized cost of perpetual service? P319,000 P310,000 322,000 What is the future worth in year 10 of $5,000 at n= 0, $10,000 at n= 3 years, and $8,000 at n= 5 years if the interest rate is 12% per year? $40,533 $16,657 {$51,735 (exact: 51,734.79)$71,435 Aloan 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? You are considering a new punch press machine. This machine will have an estimated service life of 10 years. The expected salvage value at the end of service life will be 10% of the purchase cost. Its annual operating cash flows are estimated to be $60,000. If you can purchase the machine at $208,758 and MARR is set at 10%, what is the expected rate of return (ROR) on this investment? Abank charges 12% simple interest on a P300 loan. How much will be repaid if the loan is paid back in one lump sum after three years? Money borrowed today is to be paid in 6 equal payments at the end of 6 quarters. If the interest is 12% compounded quarterly, how much was initially borrowed if a quarterly payment is P2,000? An investment option is available with continuous compounding at 5% interest. If you invest $8,000 now, how much interest income will you earn if you cash out in 3.5 years? The officers of the International Leather Company is considering building a plant in Metro Manila costing P2,250,000. At the end of 12 years, the plant can be sold for 500,000. It is estimated that sales will be P1,000,000 per year and that labor would cost annually P100,000 and overhead would be P55,000. Taxes and insurance would be 3% of the first cost. If MARR Is at least 20%. ‘What is the rate of return of the Metro Manila plant project? By the condition of a will, the sum of P2,000 Is left to a girl to be held in trust fund by her quardian until it amounts to P50,000. When will the girl receive the money if the fund is invested at 8% compounded quarterly? A bridge with initial cost of P50,000,000 has a life of 20 years. The bridge must be partially re-built at the end of each 20 years at a cost of P10,000,000. It will have an annual operating cost f P1,000,000 for the first 10 years and P500,000 thereafter. At 6% annual interest; Find the present worth of a future payment of 100,000 to be made in 10 years with an interest of 12% compounded quarterly. Asum P1,000 is invested now and left for eight years, at which time the principal is withdrawn. The interest has accrued and is left for another eight years. If the effective annual interest rate is 5%, what will be the withdrawal amount at the end of 16" year? Find the net present worth of the following cash flow series at an interest rate of 896. ‘A newly-built business property, containing a space for a store and two offices, can be purchased for $1,200,000. A prospective buyer estimates that during the next 10 years he can obtain annual rentals of at least $458,460 from the property, and the annual out- of-pocket expenditure will not exceed $60,000. He believes that he should be able to dispose of the property at the end of 10 years at not less than $700,000. Annual taxes and insurance will total 2.5% of the first cost. Assume he has sufficient capital to purchase the property, and that the minimum attractive return (MARR) he Is obtaining from his capital is 20%. Compute the payback period of the investment. (in two decimal places) Find the present value in pesos, of a perpetuity of P15000 payable semi-annually if money is worth 8% compounded quarterly Compute the equivalent rate of 6% compounded semi-annually to a rate compounded quarterly You need P4,000 per year for four years to go to college. Your father invested P5,000 in 7% account for your educatuon when you were bor. If you withdraw P4,000 at the end of you 17th, 1th, 19th, and 20th birthday, how much money will be left in the account at the end of the 21st year? Maintenance cost of an equipment is P20,000 for 2 years, P40,000 at the end of 4 years and80,000 at the end of 8 years. Compute for the semi-annual amount that be set aside for this equipment. Money worth 10% compounded annually. How much money must be invested on Jan1,1998 in order to accumulate P2,000 on Jan. 1, 2003. Money is worth 6%, P1,494.52 https:/quizlet.com/216147177/integrated-course-1-engineering-economics-flash-cards/ uizlet.com/39: 9/engineerit nomy-dean-medina-flash-cars If there is only one seller and many buyers, the market situation is Monopoly 2)What is defined as any tangible economic product that contributes directly or indirectly to the satisfaction of human want? ‘3)What is the acid test ratio? an index of short term paying ability 4) Consists of the actual counting or determination of the actual quantity of the materials ‘on hands as of a given date. Physical Inventory 5) Interest that is based on the original amount of the loan. Simple Interest 6) An interest rate of 20% per year, compounded monthly is. Effective Monthly rate 7) When comparing two mutually exclusive alternatives by the ROR method, if the rate of return on the higher first-cost alternative exceeds that of the lower first-cost, alternative, (a) The rate of return on the increment of investment between the two is greater than the overall rate of return for the lower first-cost alternative (b) The rate of return on the increment of investment is greater than the overall rate of return for the higher first-cost alternative (©) The higher first-cost alternative is the better of the two alternatives (q) All of the above 8) An annuity where the first payment is made several periods after the beginning of the annuity. DRLRTARR Extra ordinary annuity- he equal payments are made at the end of each compounding period starting from the first compounding period annuity due - the equal payments are made at the beginning of each compoundingperiod starting from the first period. Perpetuity - payment period extends forever, which means that the periodic payments continue indefinitely 9) Direct labor cost incurred in the factory and direct materials costs are the costs of all materials that go into production. The sum of these two direct costs are known as: 10) Cost of things that are neither labor nor materials 11) the present worth of an alternative that provides infinite service is called its: 12) The worth of a property as shown on the accounting records of an enterprise 13) It calculates the number of years required for cash inflows to just equal cash outflows 14) An index of short term paying ability is called Acid-test ratio 15) What is defined as the analysis and evaluation of the monetary consequences by using the theories and principles of economics to engineering applications, design and projects? 17) What is the market situation exist when there are many buyers and many sellers? 18) Which of the following statements is not one of the four fundamental principles of engineering economics? (a) Receiving a dollar today is worth more than a dollar received in the future. (b) To expect a higher return on investment, you need to take a higher risk. (©) Marginal revenue must exceed marginal cost to justify any production.Which of the following statements is incorrect? Extra Time Value of money — It is better to receive money earlier than later due to the interest that money accrues over a period of time 2. Difference among the alternatives count — The economic decision is based in the differences that we have among the alternatives under consideration. The things which are similar among those alternatives are irrelevant. 3.The Marginal revenue must be greater than Marginal Cost — First evaluate the benefits of the project internally before comparing it with other alternatives. Therefore among the different productive sources , the one with minimum marginal cost and maximum marginal benefit must be choosen 4.Risk and return go hand in hand — To get a greater return, there must be greater risk. However the risk should be taken calculatively. 19) In most engineering economy studies, the best alternative is the one which: ) Will last the longest time b) Is easiest to implement 4) Is most politically correct 20) Liquid assets such as cash and other assets that can be converted quickly into cash, such as accounts receivable, and merchandise are called: 21) The worth of a property that is equal to the original cost less depreciation: 22) Modes of extinguishing obligations when creditor abancions his right to collect:24) Which of the following statements defines the discipline of engineering economics most closely? ———— 25) An artificial expenses that spreads the purchase price of an asset or other property over a number of years. 26) A series of payments that increase or decrease in each succeeding period by a fixed amount or percentage Compound Interest (Gradient?) 27) In a mutually exclusive set of alternatives, one or more of the alternatives out of the group can be chosen. FALSE 28) Interest is money paid for the use of equity capital F 29) Material cost is considered from variable costs T 30) Decreasing a company’s fixed expenses should reduce the break-even point. True 32) Which of the following statements is correct? b. Alll of the Choices c. The present value of the proposa''s net cash inflows, less the proposal's initial cash outflow is known as the Net Present Value d. The number of years required to recover the initial cash investment in a project, is called Payback Period 33) The total income equals the total operating cost. Break even-no gain no loss 35) Oligopoly exists when there is/are: a. few sellers and few buyers b. few sellers and many buyers c. many sellers and few buyers d. one seller and few buyers 36) The worth of a property that is equal to the original cost less depreciation:37) A diagram drawn to help visualize and simplify problem having diverse receipts and disbursements a. Cash-flow b. Investment c. Budget 4d. Year-end Convention 38) Itis the amount that a willing buyer will pay to a willing seller for a property where each has equal advantage and is not compelled to buy or sell 39) What refers to the goods and services that are required to support human life, needs and activities? Necessity 40) Those funds that are required to make the enterprise or project a going concern: Working capital 41) The alternatives which are standalone solutions for given situations in engineering involve: A.a purchase cost (first cost) B.the anticipated life of the assest C.the yearly costs of maintaining the assest (annual maintenance and operating cost) D.the anticipated resaleable value (salvage value) and the interest return (rate of return) 42) Liquid assets such as cash and other assets that can be converted quickly into cash, such as accounts receivable, and merchandise are called: 43) The internal rate of return method is also called as a, Profitability Method c. None of the Above d. Cash Flow Method 44) An association of two or more individuals for the purpose of operating a business a co-owners of a profit: Coxpartnership 45) The profession in which a knowledge of mathematical and natural sciences gained by study, experience and practice is applied with judgment to develop ways to utilize economically the materials and forces for the benefit of mankind. Eng/E¢o46) These are products or services that are desired by humans and will be purchased if money is available after required necessities have been obtained LUXUTy What is defined as any tangible economic activity that contributes directly or indirectly to the satisfaction of human want? 47) Kind of obligation, which has no condition attached. Gratuitous: 48) When evaluating a large-scale engineering project, which of the following items is important? a) Expected Profitability B) timing of cash flows ¢) degree of financial risk Is is defined to be capacity of a commodity to satisfy human want 49) Instead of the profits being paid out to the stockholders or owners as dividends, they are retained in the business and used to finance expansion. This is called: 50) What market situation exists when there are few sellers and few buyers? 51) What is considered as the standard unit which forms the basis of a country's domestic money supply? 52) Interest that is earned on prior interest in addition to the principal 53) An annuity where payments are made at the beginning of each period 54) The quantity of a certain commodity that is offered for sale at a certain price at a given place and time. Demand 55) The present worth of all depreciation over the economic life of the item is called 56) If company A uses more debt that Company B and both companies have identical operations in terms of sales, operating costs, etc., which of the following statements istrue? ‘The peso amount as earned from investment or project is called ROI ‘Surplus ROR You are looking to buy stock in a high-growth company. Which of the following ratios best indicates the company's growth potential? term used to describe payment of an employee for time spent on the property of the employer though not actually working at the job, e.g. time spent changing clothes to get ready for work or time spent travelling from the plant entrance to the place of work.Call-in Pay b. Lost Time Pay 4 Downtime Pay Form of summary of assets, liabilities and net worth: Break-even point b. Production ©. 4 Balance method ‘The ratio of the annual revenues to the annual expenses. Income RatioBenefit-Cost Ratio Benefit Ratio ‘The study of economic problems with the concept of obtaining the maximum benefit at the least cost Accounting Economics Engineering It is worth of a property as recorded in the book of an enterprice Price Scrap ValueSalvage Value What market situation exists where there is only one buyer and only one seller? Bilateral monopsony b. Monopoly, ‘Monopsony a. Falls after the increase reaches a certain variable amount, this is called InflationProcess Factor a. Law of Supply and Demand tis the loss of value of equipment with use over a period of time. It could mean the difference in value between the net asset and the used asset currently in service. Extracted The difference between the book value and actual lower resale value is: Which of the following statements is most correct? ‘The cash flow statement summarizes how the corporation generated cash during the operating period b.None of the Choices ‘The income statement summarizes the net income produced by the corporation at a specified reporting date What is an annuity? a ‘Aceries of equal payments at equal time periods b. The cost of manufacturing a product ° The overhead cost per unit of production 4 ‘An investment that yields an equal amount of interest each year Jullien = 17:12 Which of the following methods is most suited in evaluating/comparing alternatives with different lives (finite)? Rate of return method b.Urgency rating method ©. a Uniform annual cost method Estimated value at the end of the useful life Compounded Annually b. Economic Life Balance Sheet q ‘Salvage Value What is the market situation whereby there is only one buyer of an goods substitute? there is no What are the two classifications of goods and services? Raw and finished b.‘Consumer and producer C Ready-made and made-to-order q Local and imported Pick up the correct statement from the following: Interest on borrowing = present amount owed - original loan b. ‘The change in the amount of money over a given time period is called ‘time value’ of money, a most important concept in engineering economy c The original investment (or loan) is referred to as principal ‘The manifestation of the time value of money is termed as interest f there are many sellers and few buyers, the market situation is b. OligopolyDuopsony Monopoly ‘The length of time during which the property may be operated at a profit Length of Time b. Life Physical Life a. ‘What is considered as the basie consuming or demanding unit of a commodity? Producer b. Manufacturera. Seller It occurs when a unique product or service is available only from a single supplier and entry of all other possible suppliers prevented: b. Profitability ‘Competition Inventory What is another term for ‘perfect competition’? b. No-limit competitionFree-for-all market Heterogeneous market Gross profit, sales less cost of goods sold, as a percentage of sales is called