ECO 017: Engineering Economics

Module 6&7: Ordinary Annuity and Annuity Due

1 – ORDINARY ANNUITY put the machine on

sale after 4 years.
What must be the
resale price to justify
the investment if the
engineer should make
12% annual return on
the investment.
1. What is the present
worth of P 10,000 4. A service car whose
payment made at the cash price was
end of every three 540,000.00 and it was
months for 5 years if bought with a
the interest rate is downpayment of
12% compounded 162,000.00 and a
quarterly? monthly installment of
10,874.29 for 5 years.
2. If money is worth 10% What was the rate of
compounded interest if
quarterly, what compounded monthly?
monthly savings is
required monthly in 5. If Mr. Bean wants to
order to have buy a 1,000,000.00
P200,000 at the end at house and lot and
the end of 10 years. initially, he will pay
300,000.00. How much
3. An engineer wants to he should pay monthly
start a business which if for 3 years the
requires purchase of a money is worth 9.5%
𝑷 100,000 worth compounded monthly?
machine which will And what is the future
produce a net income value of all the equal
of 𝑷 11,000 per year payments?
after deducting
operating expenses.
The engineer plans to

Module 6&7: Ordinary Annuity and Annuity Due
6. A certain construction
equipment can be
purchased with a
downpayment of
250,000 and equal
payment of 20,000
every end of 3 months
for next 4 years. If
money is worth 12%
compounded
quarterly, determine
the equivalent cash
price of the equipment.
2 – ANNUITY DUE
1. A contractor bought a
concrete mixer at
P120,000 if paid in
cash. The mixer may
also be purchased by
installment to be paid
within 5 years. If
money is worth 8%
compounded annually,
what is the amount of
each annual payments
that are made at the
beginning of each year.
ECO 017: Engineering Economics
A. If a downpayment of 30% was
made, how much is the annual
payments?
B. How much does it cost for the
contractor to buy the mixer,
considering a 30% downpayment
was made.
2. At the beginning of each
month, $200 is deposited
into a retirement fund. The
fund earns 6% compounded
monthly and paid into the
account at the end of the
month. How much is in the
account if deposits are made
for 10 years?
3. A contractor bought a
welding machine that is
worth 850,000.00 after 5
years and it is payable in 10
semi-annual payments. Each
installment is payable at the
beginning of each period. If
the rate of interest is 26%
compounded semi-annually,
determine the amount of
each installment.
4. A contractor wishes to buy a
machine worth 1,000,000
after one year. The bank
gives an interest of 1.5%
 ECO 017: Engineering Economics
Module 6&7: Ordinary Annuity and Annuity Due

compounded monthly. If he
deposits 100,000 at the
beginning of each month,
starting 6 months from now,
how much more will the
contractor need to have to
buy the machine?

JUNCEL’S ECON RULE #2