PHILIPPINE INSTITUTE OF CIVIL ENGINEERS, INC.International Charter No. I-07 ENGINEERING ECONOMY – SAMPLE PROBLEM SOLUTIONS SIMPLE INTEREST: 1. P8, 000 is borrowed for 75 days at 12% per annum simple interest. How much will be due at the end of 75days? 2. It is the practice of almost all banks in the Philippines that when they grant a loan, the interest for one year is automatically deducted from the principal amount upon the release of the money to a borrower. Let us assume that you applied for a loan with the bank and the P100,000 was approved at an interest rate of 12% of which P12,000 was deducted and you were given a check of P88,000. Since you have to pay the amount of P100,000 one year after, what then will be the effective interest rate? COMPOUND INTEREST 1. A man invests $10,000 in an account that pays 8.5% interest per year, compounded quarterly. What is the amount of money that he will have after 3 years? PHILIPPINE INSTITUTE OF CIVIL ENGINEERS. What is the amount of money that he will have after 3 years if it is compounded continuously? 4. Find the time required for the money to double if the interest is compounded semi-annually. I-07 2. find equivalent nominal rate compounded quarterly. 5. . A sum of $5000 is invested at an interest rate of 9% per year. If money is invested at 8% compounded semi-annually. INC.5% interest per year. (b) compounded continuously. International Charter No. 3. Find the effective rate of interest for an investment that earns 5 ½ % per year (a) compounded quarterly. A man invests $10.000 in an account that pays 8. What is the accumulated amount in 5 years? b. you deposit P1000 per month. What is the monthly installment if he agrees to pay the balance on monthly installment for 5 years? b. A man paid 10% down payment of P2. 000. what is the sum of your money in 5years? 2. If in two years. I-07 ORDINARY ANNUITY 1. He fails to pay the monthly installment for the first three years and decides to pay his present and future obligations at the end of the 3rd year. A man deposits P500 every month in an investment which earns 7% compounded monthly. If the rate of interest is 15% compounded monthly a. What single amount must he pay to cancel his entire obligation at the end of the 3rd year? . PHILIPPINE INSTITUTE OF CIVIL ENGINEERS. instead of depositing P500 per month. a. INC. International Charter No.000 for a house and lot. PHILIPPINE INSTITUTE OF CIVIL ENGINEERS.000 down payment and 10 deferred semi- annual payments of P8.000 for a house and lot. What is the present value of the investment if the rate of interest is 12% compounded semi- annually? . A person buys a piece of lot for P100.000 each. A man paid 10% down payment of P2. 000. International Charter No. starting three years from now. What would be his monthly installment if he agrees o pay his balance on a monthly installment starting at the end of the 2nd year until the end of the 5th year? 2. If the rate of interest is 15% compounded monthly. INC. I-07 DEFFERED ANNUITY 1. and has a salvage value of P30. PHILIPPINE INSTITUTE OF CIVIL ENGINEERS. How much could the investor afford to pay for another machine for the same purpose.000 after one year. 000.000. A contractor wish to buy a machine worth P1.000 after one year? CAPITALIZED COST 1. 000. A machine cost P300. if the money is worth 5%? . What single amount must be deposited in order to have the desired amount after one year? b.000. I-07 ANNUITY DUE 1.000 new. What amount must be deposited at the bank at every beginning of the month in order to have P1. whose life is 10 years and salvage value is P40. International Charter No. and must be replaced at the end of each 15 years. 2. 000. if the money is worth 5% and the final salvage value is P50. find the capitalized cost. last for 6 years. If the bank gives an investment of 1. INC. If the annual maintenance required is P5. 000.000.5% monthly a. A certain equipment cost P150. The first value of a machine is P1. INC. I-07 STRAIGHT LINE DEPRECIATION 1.800. The first value of a machine is P1.800. Determine the book Value after 3 years using Straight Line method.000 a the end of is life of 5 years.000 a the end of is life of 5 years.000 with a salvage value of P300. PHILIPPINE INSTITUTE OF CIVIL ENGINEERS. SUM OF THE YEARS DIGIT METHOD (SYOD) 1. Determine the book Value after 3 years using sum of the years digit method . International Charter No.000 with a salvage value of P300. The first value of a machine is P1. Determine the book Value after 3 years using declining balance method. PHILIPPINE INSTITUTE OF CIVIL ENGINEERS.000 with a salvage value of P300. International Charter No. The first value of a machine is P1. INC.000 with a salvage value of P300. DOUBLE DECLINING BALANCE METHOD 1.000 a the end of is life of 5 years.800.800. I-07 DECLINING BALANCE METHOD 1.000 a the end of is life of 5 years. Determine the book Value after 3 years using double declining balance method . CAPITAL RECOVERY – DEPLETION 1. if it is sufficient to pay interest annually a the rate of 6% on the original investment and accumulate a replacement fund invested at 4%? . The mine will yield an equal dividend at the end of each year. I-07 SINGKING FUND METHOD 1. INC. The first value of a machine is P1. Its Plant has a salvage value of P1 million at the end of the time. and will last for 20years. Determine the book Value after 3 years using sinking fund method if the money worth 6% per annum. International Charter No. PHILIPPINE INSTITUTE OF CIVIL ENGINEERS.000 a the end of is life of 5 years.000 with a salvage value of P300. A mine cost P21 million.800. what is the annual dividend. a. A project cost P100.50 and material at P3. Assuming money is worth 8% with no salvage value. Is it profitable or not? BREAK-EVEN ANALYSIS 1. how many pieces must be produced each month for the manufacturer to break-even? . I-07 COST-BENEFIT RATIO 1. What is the benefit-cost ratio.00 each. A plywood manufacturer produces a piece of plywood at a labor cost of P0.000. Find the present worth of benefits b. The benefits at the end of each year for a period of 5 years is P40. c. International Charter No. The fixed charges on business are P50.000. PHILIPPINE INSTITUTE OF CIVIL ENGINEERS.50 per piece. If one plywood sells for P6.00. 000 a month and a variable cost is P0. INC.
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