e - Engineering Economics - Sp

ENGINEERING ECONOMICS
Sample Problems
1
 1. A man made a loan of P5,000.00 for a
period of 15 months at a simple interest of
15%. What must be the amount due at the
end of the loan period?
 a. P5,937.50
 b. P5,397.50
 c. P5,793.50
 d. P5,593.70
2
 2. An amount of money invested at 12%
interest per annum will double in
approximately;
 a. 4 years
 b. 5 years
 c. 6 years
 d. 7 years
3
 3. If you borrowed P10,000 from a bank with
18% interest per annum, what is the total
amount to be repaid at the end of one year?
 a. P11,800
 b. P19,000
 c. P19,555
 d. P20,000
4
 4. A savings association pays 1.5% interest
quarterly. What is the effective annual interest
rate? (ME Board October 2000).
 a. 7.85%
 b. 8.55%
 c. 6.55%
 d. 6.14%
5
 5. The purchase amount of an equipment
P100,000 has been made available through a
loan which earns 12% per annum. It has been
agreed that the load be payable in 10 equal
payments. How much then is the yearly due?
 a. P10,587.90
 b. P17,698.42
 c. P27,908.65
 d. P18,765.98
6
 6. An engine costing P40,000 may be
purchased on installment basis by paying
P10,000 down payment, P5,000 at the end of
the first year and five equal payments
beginning at the end of the second year.
Determine the amount of these equal
payments. Money is worth 12% a year.
 a. P8,933.20
 b. P9,339.92
 c. P6,733.92
 d. P7,933.92
7
 7. A P10,000 loan is to be paid off in 10
equal annual payments. The annual interest
rate is 15%. How much interest will be paid in
the first two years?
 a. P2,926.10
 b. P3,005.10
 c. P2,970.20
 d. P2,940.20
8
 8. A fund is to provide an annual
scholarship at P4000 for the first 5 years;
P6000 for the next 5 years and P9000
thereafter. The fund will be established 1 year
before the first scholarship is awarded. If the
fund earns 12% interest, what sum must be
deposited?
 a. P50,840.00
 b. P60,921.00
 c. P45,076.00
 d. P12,632.00
9
 9. The officers of PSME desire to award a P3600
scholarship annually to deserving mechanical engineering
students for as long as scholarship fund shall last. The
fund was started July 1, 1987 by a donor in the amount of
P18,000. The PSME invested this sum at that time at 8%
per annum and plans on adding P600 each year to the
fund from its dues starting July 1, 1988 for as long as the
awards are made. For how many years starting July 1,
1988 can scholarship be awarded and what will be the
balance in the fund after the last award is made?
 a. 8 yrs, P1,406
 b. 9 yrs, P1,207
 c. 8 yrs, P2,033
 d. 9 yrs, P1,200
10
 10. A structure costs P12,000 now. It is
estimated to have a life of 5 years with a
salvage value at the end of life of P1,000.
Determine the book value after 3 years using
SLM.
 a. P 5,400
 b. P 3,200
 c. P 1,733
 d. P 8,333
11
 11. A certain type of machine losses 10% of
its value each year. The machine cost P2,000
originally. What is the total depreciation after
four years?
 a. P 200
 b. P 819.12
 c. P 542
 d. P 687.80
12
 12. A consortium of international
telecommunication companies contracted for the
purchase and installation of fiber optic cable linking
Manila City and Cebu City at a total cost of P 960 M.
This amount includes freight and installation charges
estimated at 10% of the above total contract price. If
the cable shall be depreciated over a period of 15
years with zero salvage value and money worth 6%
per annum, what is the annual depreciation charge?
 a. P 40.2 M
 b. P 41.2 M
 c. P 42.1 M
 d. P 43.2 M
13
 13. An asset is purchased for P 9,000. Its
estimated life is 10 years, after which it will be
sold for P 1,000. Find the book value at the
end of third year if SYDM is used.
 a. P6,100
 b. P5,072
 c. P4,500
 d. P4,800
14
 14. A property is purchased at P 1M and is
expected to last 10 years with a salvage value
of P100,000. What is its book value at the end
5 years of service using the double declining
balance method of depreciation?
 a. P327,680
 b. P348,745
 c. P400,000
 d. P876,098
15
 15. The property is installed at a total cost of
P200,000 with zero salvage after 10 years. It
produces 200 units every year of service.
What is the book value after 2 years of service
using the service output method.
 a. P 40,000
 b. P 80,000
 c. P 160,000
 d. P180,000
16
 16. A property is composed of 20 units and
each unit cost P100. If there are 5 units sold
during a year, what is the depletion charge
during the year?
 a. P500
 b. P200
 c. P1000
 d. P400
17
 17. Petron Philippines, a multinational
company, has a total gross income for a
particular year of P50,000,000. The taxable
income after taking all deductions except for
depletion is P18,500,000. What is the allowable
depletion allowance or depletion charge for
that particular year. Take percentage of gross
income for oil as 22%.
 a. P 9,250,000
 b. P 11,000,000
 c. P 10,500,000
 d. P 9,750,000
18
 18. The annual maintenance cost of a
machine shop is P69,994.00. 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.
 a. 886 units
 b. 885 units
 c. 688 units
 d. 668 units
19
 19. A P1,000, 6% bond pays dividend
seminannually and will redeemed at 110% on
June 21, 2004. It is bought in June 21, 2001 to
yield 4% interest. Find the bond value or bond
price.
 a. P1,122.75
 b. P1,133.78
 c. P1,144.81
 d. P1,441.18
20
 20. A motorcycle cost P50,000 has an
expected life of ten years. The salvage value
is estimated to be P2,000 and annual
operation costs are estimated at P1,000. What
is the appropriate rate of return on the
investment if the annual revenue is
P10,000.00? (ME Board October 2002).
 a. 12%
 b. 11%
 c. 13%
 d. 14%
21
END
22

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ENGINEERING ECONOMICS

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