Engineering Economy

ExChEL Group Study Session
(BILLONES, FULGENCIO, LAYUG, LOPEZ, SAMPAGA)

(Session no. 2, July 7, 2016)
General Engineering Engineering Economics

1. Is the actual or exact rate of interest on the principal during one year
a. continuous interest
b. simple interest
c. effective rate of interest

d. nominal rate of interest
2. Find the nominal rate which if converted quarterly could be used instead of 12%
compounded monthly. What is the corresponding effective rate?
a. 12.68%
b. 12.55
c. 12.12%
d. 12%
3. What is the present worth of P500 deposited at the end of every three months for
6 years if the interest rate is 12% compounded semiannually?
a. 1006.10
b. 8508
c. 8468
d. 6001.10
4. A businessman needs P50,000 for his operations. One bank is willing to lend him
the money for one year at 13.5% interest compounded monthly. Another bank is
charging 14%, with the principal interest payable at the end of one year. A third
bank is willing to lend him P50,000 payable in 12 equal monthly installments of
P4,600. Which offer is best for him?
a. First bank
b. second bank
c. third bank d. either first or
last bank
5. A debt of P40,000 whose interest rate is 15% compounded semiannually, is to be
discharged by a series of 10 semiannual payments, the first payment to be made 6
months after consummation of the loan. The first 6 payments will be P6,000 each,
while the remaining 4 payments will be equal and of such amount that the final
payment will liquidate the debt. What is the amount of the last 4 payments?
a. P5,455
b.P4,545
c. P3,675
d. P4,525
6. Is the sum of the first cost and the present worth of all cost of replacement,
operation and maintenance for a long time or forever
a. Capitalized Cost
b. Marginal Cost
c.
Development
Cost
d. Total Cost
7. a method of repaying a debt, the principal and interest included, usually by a
series of equal payments at equal interval of time.
a. Liquidation b. Annuity due
c. Disbursement
d. Amortization
8. By the conditions of a will, the sum of P25,000 is left to a girl to be held in trust
by her guardian until it amounts to P45,000. When will the girl receive the money if
the fund is invested at 8% compounded quarterly?
a. 8.21 years
b. 7.24 years
c. 7.42 yearsd. 8.12 years
9. A young woman who had just turned 22 and graduated from college accepts a
good job and desires to establish her own retirement fund. At the end of each year
Property of Billones, Fulgencio, Layug, Lopez, Sampaga
thereafter, she plans to deposit P2,000 in a fund at 15% annual interest. How old
will she be when the fund has accumulated to P1,000,000?
a. 52
b. 53
c. 51
d. 50
10. Mr. and Mrs. Layug borrows P600,000 at 12% compounded annually, agreeing to
repay to loan in 15 equal annual payments. How much of the original principal is
still unpaid after he has made the 8th payment?
a. 437,630
b. 402,043 c. 469,045 d. 497,754
11. What is the future worth of P600 deposited at the end of every month for 4
years if the interest rate is 12% compounded quarterly?
a. 962.82
b. 986.24
c. 36,642
d. 31,246
12. A woman borrowed P3,000 to be paid after 1 years with interest at 12%
compounded semiannually and P5,000 to be paid after 3 years at 12% compounded
monthly. What single payment must she pay after 3 years at an interest rate of
16% compounded quarterly to settle the two obligations?
a. 14,228
b. 11,124
c. 13,854
d. 12,628
13. A contract has been signed to lease a building at P20,000 per year with an
annual increase of P1,500 for 8 years. Payments are to be made at the end of each
year starting one year from now. The prevailing interest rate is 7%. What lump sum
paid today would be equivalent to the 8 year lease-payment plan?
a. 149,650
b. 137,230 c. 158,120 d. 147,610
14. Interest that is calculated using the principal only, ignoring any interest that had
been accrued in preceding periods.
a. Compound b. Continuous
c. Simple
d. Nominal
15. What is the effective interest rate of a 17% interest compounded continuously?
a. 17.72%
b. 18.53% c. 18.11
%
d. 18.39%
16. It is the length of time required to recover the first cost of an investment from
the net cash flow produced by that investment for an interest rate of zero.
a. Interest Period
b. Useful Lifec. Payback Period d. Sum of
the Years
17. An interest rate used to convert cash flows into equivalent worth at some
point(s) in time.
a. Minimum Acceptable Rate of Return
c. Minimum Attractive Rate of
Return
b. Minimum Annual Rate of Return
d. Effective rate of interest
18. It is the additional cost of producing one more unit of a product.
a. Fixed Cost
b. Variable Cost
c. Increment Cost
Cost
d.
Marginal
19. It is referred as the profit on an investment over a period of time, expressed as a

proportion of the original investment.
a. Rate of Return
Rate of Return
b. Annual Worth c. Net Present Value
d. Internal
20. The equivalent uniform annual cost of the capital invested.

a. Annual Worthb. Capital Recovery c. Internal Rate of Return
Future Worth
d.
21. BeautiFuel is expected to produce 10,000 cans of oil that is purchased for
Php500,000.00. 1 can of oil is equal to 40 L and is sold for Php120.00 per can.
However, it costs Php80.00 per can for refining and processing costs. If 2,000 cans
are produced this year and the depletion allowance as a percentage of gross sales is
15%, the depletion allowance using the unit depletion method is
a. P 100,000
b. P 200,000 c. P 300,000 d. P 400,000
22. The depletion allowance in number (22) using the percentage depletion method.
a. P 39,000
b. P 40,000 c. P 35,000 d. P 36,000
23. An investment of P270,00 can be made in a project that will produce a uniform
annual revenue of P 185,400 for 5 years and then have a salvage value of 10% of
the investment. Out-of-pocket costs for operation and maintenance will be P 81,000
per year. Taxes and insurance will be 4% of the first cost per year. The company
expects capital to earn not less than 25% before income taxes. What is the rate of
return on the investment?
a. 28%
b. 34%
c. 36%
d. 24%
24. What is the total annual cost in number (23) using the annual worth method?
a. P 188,909
b. P 178,109 c. P 121,409 d. P 91,800
25. Compute the payback period in number (23).
a. 1.2 years
b. 2.6 years c. 3.2 years d. P 4 years
26. A unit of welding machine cost P 45,000 with an estimated life of 5 years. Its
salvage value is P2,500. Find its depreciation rate by straight line method.
a. P 17.75%
b. 19.88% c. 18.89%
d. 15.56%
27. An equipment costs P 10,000 with a salvage value of P 500 at the end of 10
years. Calculate the annual depreciation cost by sinking fund method at 4%
interest.
a. P 950.00
b. P 791.26 c. P 845.32 d. P 971.12
28. A machine costing P 720,000 is estimated to have a book value of P 40,545.73
when retired at the end of 10 years. Depreciation cost is computed using a constant
percentage of the declining book value. What is the annual rate of depreciation in
%?
a. P 15%
b. 25%
c. 3.7%
d. 1.9%
29. A company purchases an asset for P 10,000.00 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.
a. P 1,000
b. P 857
c. P 937
d. P 747
30. Willy Wonka's chocolate bar costs $3.00 per bar. The chocolate factory's cost of
electricity per chocolate bar is $1.00 and the tax to be paid is only 10% of the cost
of electricity per chocolate bar. The factory's real estate tax is $76.00 per month
and $260.00 of miscellaneous fees monthly. The Oompa Loompas working in the
factory are paid $500 a month. Compute for the number of chocolate bars to be
sold per month to breakeven.
a. 399
b. P 410
c. 390
d. 405
Answer Key:
C, C, B, B, A, A, D, C, A, B, C, D, D, C, B, C, C, D, A, B, A, D, D, A, B, C, B, B, B, A

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ExChEL Group Study Session

(BILLONES, FULGENCIO, LAYUG, LOPEZ, SAMPAGA)

General Engineering Engineering Economics

c. effective rate of interest

Property of Billones, Fulgencio, Layug, Lopez, Sampaga

19. It is referred as the profit on an investment over a period of time, expressed as a

Property of Billones, Fulgencio, Layug, Lopez, Sampaga

b. Annual Worth c. Net Present Value

20. The equivalent uniform annual cost of the capital invested.

Property of Billones, Fulgencio, Layug, Lopez, Sampaga

Property of Billones, Fulgencio, Layug, Lopez, Sampaga

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