ENGINEERING ECONOMY TUTORIAL ENGINEERING ECONOMY TUTORIAL

1. An ordinary simple interest rate of 8.5% per year is applied on a 1. An ordinary simple interest rate of 8.5% per year is applied on a
P50, 000.00 loan made on July 01, 2005. Find the lump sum P50, 000.00 loan made on July 01, 2005. Find the lump sum
interest to be paid on the loan on June 05, 2012. interest to be paid on the loan on June 05, 2012.
a. P29, 879.86 c. P27, 868.99 a. P29, 879.86 c. P27, 868.99
b. P28, 979.68 d. P26, 997.88 b. P28, 979.68 d. P26, 997.88
2. A P50,000.00 loan made on July 01, 2005. Determine the total 2. A P50,000.00 loan made on July 01, 2005. Determine the total
amount to be paid on the loan on June 05, 2012 if an exact interest amount to be paid on the loan on June 05, 2012 if an exact interest
rate of 7.5% is used. rate of 7.5% is used.
a. P75,988.74 c. P77,549.88 a. P75,988.74 c. P77,549.88
b. P74,988.75 d. P78,754.98 b. P74,988.75 d. P78,754.98
3. Which of the following has the greatest effective rate? 3. Which of the following has the greatest effective rate?
a. 12.31 % compounded quarterly a. 12.31 % compounded quarterly
b. 12.20 % compounded monthly b. 12.20 % compounded monthly
c. 12.35 % compounded annually c. 12.35 % compounded annually
d. 12.32 % compounded semi-annually d. 12.32 % compounded semi-annually
4. A house and lot costing P2 million was bought at a down payment 4. A house and lot costing P2 million was bought at a down payment
of P500,000 and P1 million after one year. The remaining balance of P500,000 and P1 million after one year. The remaining balance
will be paid at the end of the third year. If the interest rate is 24% will be paid at the end of the third year. If the interest rate is 24%
compounded semi-annually, what is the required payment? compounded semi-annually, what is the required payment?
a. P1,721,800.53 c. P1,215,380.07 a. P1,721,800.53 c. P1,215,380.07
b. P1,538,007.21 d. P1,387,215.00 b. P1,538,007.21 d. P1,387,215.00
5. How long will it take a P5,000.00 investment to be worth 5. How long will it take a P5,000.00 investment to be worth
P5,500.00 if it earns 2.19% interest compounded continuously. P5,500.00 if it earns 2.19% interest compounded continuously.
a. 3.45 years c. 5.43 years a. 3.45 years c. 5.43 years
b. 4.35 years d. 5.34 years b. 4.35 years d. 5.34 years
6. East Side Bank offers the following effective rates on 5-year 6. East Side Bank offers the following effective rates on 5-year
loans;8% for the first two years, 10% for the third year, 11% for loans;8% for the first two years, 10% for the third year, 11% for
the fourth year, and 12% on the fifth year. If P500,000.00 is the fourth year, and 12% on the fifth year. If P500,000.00 is
borrowed, determine the lump-sum amount to be paid at the end borrowed, determine the lump-sum amount to be paid at the end
of the loan period. of the loan period.
a. P756,779.63 c. P797,537.66 a. P756,779.63 c. P797,537.66
b. P796,375.67 d. P779,756.36 b. P796,375.67 d. P779,756.36
7. The president of a growing engineering firm wishes to give each 7. The president of a growing engineering firm wishes to give each
of 50 employees a holiday bonus. How much is needed to invest of 50 employees a holiday bonus. How much is needed to invest
monthly for a year at 12% nominal interest rate, compounded monthly for a year at 12% nominal interest rate, compounded
monthly, so that each employee will receive P1,000.00 bonus? monthly, so that each employee will receive P1,000.00 bonus?
a. P3,944.24 c. P3,444.29 a. P3,944.24 c. P3,444.29
b. P3,424.94 d. P3,942.44 b. P3,424.94 d. P3,942.44
8. A parent on the day that child is born wishes to determine what 8. A parent on the day that child is born wishes to determine what
lump-sum would have to be paid into an account bearing interest lump-sum would have to be paid into an account bearing interest
at 5% compounded annually, in order to withdraw P20,000.00 at 5% compounded annually, in order to withdraw P20,000.00
each on the child’s 18th, 19th, 20th, and 21st birthdays? each on the child’s 18th, 19th, 20th, and 21st birthdays?
a. P30,941.73 c. P34,173.09 a. P30,941.73 c. P34,173.09
b. P31,730.94 d. P33,904.17 b. P31,730.94 d. P33,904.17
9. An engineer wishes to take out a P150,000.00 educational policy 9. An engineer wishes to take out a P150,000.00 educational policy
for his son, if money is worth 14% effective, find the premiums for his son, if money is worth 14% effective, find the premiums
to be paid if a) five yearly b) 20 quarterly payments are needed. to be paid if a) five yearly b) 20 quarterly payments are needed.
a. P10,057.55 c. P10,555.70 a. P10,057.55 c. P10,555.70
b.P10,507.55 d. P10,570.55 b.P10,507.55 d. P10,570.55
10. Find the present value in pesos of a perpetuity of P15,000.00 10. Find the present value in pesos of a perpetuity of P15,000.00
payable semi-annually if money is worth 8% compounded payable semi-annually if money is worth 8% compounded
quarterly. quarterly.
a.P372,537.13 c. P373,767.13 a.P372,537.13 c. P373,767.13
b.P374,977.13 d. P371,287.13 b.P374,977.13 d. P371,287.13
11. Annual maintenance costs for a machine P28,000.00 this year and 11. Annual maintenance costs for a machine P28,000.00 this year and
are estimated to increase 10% each year every year. What is the are estimated to increase 10% each year every year. What is the
present worth of the maintenance cost for six years if interest is present worth of the maintenance cost for six years if interest is
8%. 8%.
a. P154,254.51 c. P178,336.51 a. P154,254.51 c. P178,336.51
b. P162,937.51 d. P201,457.51 b. P162,937.51 d. P201,457.51
12. An equipment is bought at P420,000 with an economic life of 6 12. An equipment is bought at P420,000 with an economic life of 6
years and a salvage value of P50,000. The first year depreciation years and a salvage value of P50,000. The first year depreciation
is P105,714. The cost of money is 12% per year. What method of is P105,714. The cost of money is 12% per year. What method of
depreciation was used? depreciation was used?
a. straight-line method c. SOYD method a. straight-line method c. SOYD method
b. sinking-fund method d. declining balance method b. sinking-fund method d. declining balance method
13. A machine having a total first cost of P100,000 has a salvage cost 13. A machine having a total first cost of P100,000 has a salvage cost
of P10,000 after 10 years. Determine the book value after five of P10,000 after 10 years. Determine the book value after five
years using the double-declining balance method. years using the double-declining balance method.
a. P32,768.00 c. P40,960.00 a. P32,768.00 c. P40,960.00
b. P26,214.40 d. P34,452.00 b. P26,214.40 d. P34,452.00
14. The cost of producing an item is as follows: 14. The cost of producing an item is as follows:
Labor cost per unit = P315.00 Labor cost per unit = P315.00
Material cost per unit = P100.00 Material cost per unit = P100.00
Variable cost per unit = P3.00 Variable cost per unit = P3.00
Monthly overhead cost = P461,600.00 Monthly overhead cost = P461,600.00
If each unit is sold at P995.00, how many units must be produced If each unit is sold at P995.00, how many units must be produced
each month to break-even? each month to break-even?
a. 800 c. 850 a. 800 c. 850
b. 750 d. 950 b. 750 d. 950