ENGINEERING ECONOMY

1. P4000 is borrowed for 75days at 16% per annum simple interest. How much will be due at
the end of 75 days?

2. A deposit of P110 000 was made for 31 days. The net interest after deducting 20%
withholding tax is P890.36. Find the rate of return annually.

3. What will be the future worth of money after 12 months, if the sum of P25 000 is invested
today at simple interest rate of 1% per month?

4. Annie buys a television set from a merchant who ask P1 250 at the end of 60 days. Annie
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?

5. A man borrowed P20 000 from a local commercial bank which has a simple interest of 16%
but the interest is to be deducted from the loan at the time that the money was borrowed and
the loan is payable at the end of one year. How much is the actual rate of interest?

6. A bank charges 12% simple interest on a P300.00 loan. How much will be repaid if the
loan is paid back in one lump sum after three years?

7. What is the corresponding effective rate of 18% compounded semi-quarterly?

8. A bank pays one percent interest on savings accounts four times a year. The effective
annual interest rate is ____.

9. The amount of P12 800 in 4 years at 5% compounded quarterly is ___________.

10. On his 6th birthday, a boy is left an inheritance. The inheritance will be paid in a lump sum
of P 10 000 on his 21st birthday. What is the present value of inheritance as of the boy’s 6th
birthday, if the interest is compounded annually? Assume i = 4%.

11. The amount of P50 000 was deposited in the bank earning at 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withdrawn during the period?
12. Alexander Michael owes P25 000.00 due in 1 year and P75 000 due in 4 years. He agrees
to pay P50 000.00 today and the balance in 2 years. How much must he pay at the end of two
years if money is worth 5% compounded semi-annually?

13. At an interest rate of 10% compounded annually, how much will a deposit of P1 500 be in
15 years?

14. How long (in years) will it take money to quadruple if it earns 7% compounded
semi-annually?

15. A company invests P10 000 today to be repaid in 5 years in one lump sum at 12%
compounded annually. How much profit in present day pesos is realized?

16. A firm borrows P2 000 for 6 years at 8%. At the end of 6 years, it renews the loan for the
amount due plus P2 000 more for 2 years at 8%. What is the lump sum due?

17. P200 000 was deposited on January 1, 1988 at an interest rate of 24% compounded
semi-annually. How much would the sum be on January 1, 1993?

18. Fifteen years ago, P1 000.00 was deposited in a bank account, and today it is worth P2
370.00. The bank pays interest semi-annually. What was the interest rate paid in this account?

19. A sum of P1 000 is invested now and left for eight years, at which time the principal is
withdrawn. The interest has accrued is left for another eight years. If the effective annual
interest rate is 5%, what will be the withdrawal amount at the end of the 16th year?

20. A merchant puts his P2 000.00 to a small business for a period of six years. With a given
interest rate on the investment of 15% per year, compounded annually, how much will he
collect at the end of the sixth year?

21. A man expects to receive P25000 in 8 years. How much is that money worth now
considering interest at 8% compounded at 8% compounded quarterly?

22. P500 000 was deposited 20.15 years ago at an interest rate of 7% compounded
semi-annually. How much is the sum now?
23. In year zero, you invest P10 000.00 in a 15% security for 5 years. During that time, the
average annual inflation is 6%. How much in terms of year zero pesos will be in the account
at maturity?

24. By the condition of a will, the sum of P20 000.00 is left to a girl to be held in trust fund by
her guardian until it amounts to P50 000. When will the girl receive the money if the fund is
invested at 8% compounded quarterly?

25. What is the present worth of two P100 payments at the end of the third year and fourth
year? The annual interest rate is 8%.

26. A man 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?

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 borrowes if quarterly peyment
is P2 000.00?

28. What is the accumulated amount of five year annuity paying P6 000 at the end of each
year, with interest at15% compounded annually?

29. A young engineer borrowed P10 000 at 12% interest and paid P2 000 per annum for the
last 4 years. What does he have to pay at the end of the 5th year in order to pay off his loan?

30. If you obtain a loan of P1M at the rate of 12% compounded annually in order to build a
house, how much must you pay monthly to amortize the loan within a period of ten years?

31. Limar buys a piece of lot for P100 000 downpayment and 10 deferred semi-annual
payments of P8 000 each, starting three years from now. What is the present value of the
investment if the rate of interest is 12% compounded semi-annually?

32. Allondra bought a brand new washing machine costing P12 000 if paid in cash. However,
she can purchase it on installment basis to be paid within 5 years. If money is worth 8%
compounded annually, what is her yearly amortization if all payments are to be made at the
beginning of each year?
33. A piece of machinery can be bought for P10 000 cash or P2 000 down and payments of
P750 per year for 15 years. What is the annual interest rate for the time payments?

34. An instructor plans to retire in exactly one year and want an account that will pay him P25
000 a year for the next 15 years. Assuming a 6% annual effective interest rate, what is the
amount he would need to deposit now? (The fund will be depleted after 15 years).

35. A small machine has an initial cost of P20 000, a salvage value of P2 000 and a life of 10
years. If your cost of operation per year is P3 500 and your revenues per year is P9 000, what
is the approximate rate of return (ROR) on the investment?

36. A man paid 10% down payment of P200 000 for a house and lot and agreed to pay the
balance on monthly installments foe “x” years t an interest rate of 15% compounded monthly.
If the monthly installment was P42 821.87 , find the value of x?

37. Find the present value in pesos, of a perpetuity of P15 000 payable semi-annually if
money is worth 8% compounded quarterly.

38. A unit welding machine cost P45 000 with an estimated life of 5 years. Its salvage value is
P2 500. Find its depreciation rate by straight-line method.

39. A machine has an initial cost of P50 000 and a salvage value of P10 000 after 10 years.
Find the book value after 5 years using straight-line depreciation.

40. The cost of equipment is P500 000 and the cost of installation is P30 000. if the salvage
value is 10% of the cost of equipment at the end of 5 years, determine the book value at the
end of the fourth year. Use straight-line method.

41. An equipment costs P10 000 with a salvage value of P500 at the end of 10 years.
Calculate the annual depreciation cost by sinking fund method at 4% interest.

42. A machine costing P45 000 is estimated to have a book value of P4 350nwhen retired at
the end of 6 years. Depreciation cost is computed using a constant percentage of the declining
book value. What is the annual rate of depreciation in %?
43. A company purchases an asset for P10 000.00 and plans to keep it for 20 years. If the
salvage value is zero at the end of 20th year, what is the depreciation in the third year? Use
SYD method.

44. The maintenance cost for a sewing machine this year is expected to be P500. The cost will
increase P50 each year for the subsequent 9 years. The interest is 8% compounded annually.
What is the approximate present worth of maintenance for the machine over the full 10-year
period?

45. At 6% find the capitalized cost of a bridge whose cost is P250 M and life is 20 years, if
the bridge must be partially rebuilt at a cost of P100 M at the end of each 20 years.

46. A corporation uses a type of motor truck which costs P5 000 with life of 2 years and final
salvage value of P800. How much could the corporation afford to pay for another type of
truck of the same purpose whose life is 3 years with a final salvage value of P1 000. Money is
worth 4%.

47. The annual maintenance cost of a machine shop is P69 994. If the cost of making a
forging is P56 per unit and its selling price is P135 per forged unit, find the number of units to
be forged to break-even.

48. Mr. Ayala borrows P100 000 at 10% effective annual interest. He must pay back the loan
over 30 years with uniform monthly payments due on the first day of each month. What does
Mr. Ayala pay each month?

49. Mr. Cruz plans to deposit for the education of his 5 years old son, P500 at the end of each
month for 10 years at 12% annual interest compounded monthly. The amount that will be
available in two years is ____________.

50. How much must you invest today in order to withdraw P2 000 annually for 10 years if the
interest rate is 9%?