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This document contains 20 practice problems related to engineering economy and financial calculations. The problems cover a range of topics including present and future value calculations, loan repayment amounts, depreciation using different methods, break-even analysis, and financial ratios. Solving these problems requires applying concepts like interest, inflation, present worth, annual worth, capitalized cost, sunk costs, and others.

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Ryan Calica
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112 views2 pages

Hello

This document contains 20 practice problems related to engineering economy and financial calculations. The problems cover a range of topics including present and future value calculations, loan repayment amounts, depreciation using different methods, break-even analysis, and financial ratios. Solving these problems requires applying concepts like interest, inflation, present worth, annual worth, capitalized cost, sunk costs, and others.

Uploaded by

Ryan Calica
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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ENGINEERING ECONOMY – PRACTICE PROBLEMS

1. Maintenance costs for a machine are P500 each d. 10.2%


year. What is the present worth of these 6. Ed who was then 26 years old planned to retire
maintenance costs over a 12 year period if the at the age of 56 years and so he purchased an
interest rate is 8%? annuity. He agreed to pay equal annual
a. P1,768 payments, the payment was made on his 26th
b. P2,768 birthday and the last was made on his 55
c. P3,768 birthday. At present, Ed is receiving a yearly
d. P5,768 income of P120,000 per which he started
2. A P15,000 simple interest load is taken out at receiving on his 56th birthday. Compute for the
15% per annum interest rate. The loan matures annual amount that he paid for the annuity if
in two years with no intermediate payments. interest rate is 10%.
How much will be due at the end of the second a. P2,295.10
year? b. P6,295.10
a. P17,250.00 c. P4,295.10
b. P19,500.00 d. P7,295.10
c. P22,500.00 7. The initial cost of a paint sand mill, including its
d. P30,000.00 installation, is P800,000. The BIR approved life
3. For a loan acquired six years ago, a man paid of this machine is 10 years for depreciation. The
out the amount of P75,000. The interest was estimated salvage value of the mill is P50,000,
computed at 18% compounded annually. How and the cost of dismantling is estimated to be
much was the borrowed amount? P15,000. Using straight line depreciation, what
a. P24,782.36 is the annual depreciation charge?
b. P26,782.36 a. P75,000
c. P25,782.36 b. P85,000
d. P27,782.36 c. P76,500
4. For having been, loyal, trustworthy and d. P90,000
efficient, the company has offered a supervisor 8. Find the nominal rate which if converted
a yearly gratuity pay of P20,000 for 10 years quarterly could be used instead of 12%
with the first payment to be made one year compounded semi-annually.
after his retirement. The supervisor, instead, a. 10.58%
requested that he be paid a lump sum on the b. 11.28%
date of his retirement less interest that the c. 9.38%
company would have earned if the gratuity is to d. 11.82%
be paid on yearly basis. If interest is 15%, what 9. The corporation purchased a machine for 1
is the equivalent lump sum that he could get? million. Freight and installation charges
a. P100,375.37 amounted to 3% of the purchase price. If the
b. P137,375.37 machine shall be depreciated over a period of 8
c. P107,375.37 years with a salvage value of 12%, determine
d. P237,375.37 the depreciation charged during the 5th year
5. A unit welding machine cost P45,000 with an using the sum of the years digit method.
estimated life of 5 years. Its salvage value is a. P101,107.11
P2500. Find its depreciation using straight b. P107,110.11
depreciation. c. P170,110.11
a. 18.9% d. P100,711.11
b. 12.1% 10. An asset is purchased for P9000. Its estimated
c. 16.7% economic life is ten years, after which it will be

1
sold for P400. Find the depreciation in the first 16. The balance sheet of Oriental Services Inc. is as
three years using sum-of-the-years’ digit follows:
depreciation methods. Asset Liabilities
a. P4221.81 Cash P10,000 Payables P17,000
b. P5221.81 Receivables 12,000 Notes due 6,000
c. P6221.81 Inventory 7,000 Long term 3,000
d. P7221.81 debt
11. What is the uninflated present worth of Capital 20,000 Owner’s 23,000
P12,000 in two years if the average inflation equipment equity
rate is 8% and interest is 12%?
a. P5,201.60 What is acid test ratio?
b. P6,201.60 a. 0.846
c. P7,201.60 b. 0.592
d. P8,201.60 c. 1.11
12. A ski-resort installs two new ski lifts at a cost of d. 0.385
P2,000,000. The resort expects annual gross 17. A large sewer system will cost P8,750.00
revenue to increase P600,000 while it incurs an annually. There will be favorable consequences
annual expense of P75,000 for lift operation to the general public of P25,000,000 annually,
and maintenance. What is the pay-back period? and adverse consequences to a small segment
a. 2.5 years of the public of P2,500,000 annually. What is
b. 3.0 years the benefit to cost ratio?
c. 3.8 years a. 2.57
d. 4.5 years b. 2.56
13. A factory is running at 80% efficiency with a c. 2.55
fixed cost of P78,000.00 variable cost per unit of d. 2.58
P130.00, selling price per unit of P416.00, and 18. A P1 M issue of 3%, 15-year bond was sold at
production capacity of 5000 units. What is the 95%. What is the rate of interest of this
current profit of the factory if all products investment?
manufactured are sold? (ME Board October a. 3.4%
2001). b. 4.4%
a. P1,352,000.00 c. 5.4%
b. P1,066,000.00 d. 6.4%
c. P1,430,000.00 19. A P1,000-bond, which will mature in 10 years
d. P1,144,000.00 and with a bond rate of 8% payable annually, is
14. In a small factory with a capacity of 700,000 to be redeemed at par at the end of this period.
units per year with a 62% efficiency, the annual If it is sold at P1,030, determine the yield at this
income is P430,000 and a fixed cost of P190,000 price.
and variable cost of P0.348 per unit. What is the a. 5.57%
break-even point? (ME Board April 2002). b. 6.57%
a. 259,940 c. 7.57%
b. 288,490 d. 8.88%
c. 295,490
d. 305,490 - End -
15. If the authorized capital stock of a corporation
is P2,000,000. How much must the paid-up
capital be?
a. P125,000
b. P60,500
c. P90,000
d. P150,000

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