TARLAC STATE UNIVERSITY Engineering Economics

1. Lyam Mikael borrowed P10,000 from a loan firm at a 12. Engr. Agustin bought a tractor costing P25,000 payable
simple interest of 15%. If the interest is to be deducted in 10 semi-annual payments starting at the beginning of
from the loan at the time the money is borrowed and at each period. If the interest rate is 26% compounded
the end of 1 year he has to pay back P10,000. Calculate semi-annually, determine the amount of each
the actual rate of interest. installment.
A. 15.26% C. 12.14% A. 5,047.30
B. 17.65% D. 11.23% B. 4,654.21
C. 4,077.20
2. Determine the exact simple interest on P10,000 for the D. 5,066.25
period from January 15 to June 20, 2016, if the rate of
simple interest is 14%. 13. On the day his grandson was born, Engr. Idris deposited
A. 600.54 C. 850.54 to a trust company a sufficient amount of money so that
B. 500.57 D. 700.45 the boy could receive five annual payments of P20,000
each for his college tuition fees, starting with his 18th
3. Find the nominal rate compounded monthly which is birthday. Interest at the rate of 12% per annum was to
equivalent to 12% compounded quarterly. be paid on all amounts on deposit. The grandson chose
A. 11.89% C. 12.78% this option. How much did the grandfather deposit?
B. 10.57% D. 12.67% A. P9,500
B. P10,500
4. If a nominal interest rate per year is 12%, and C. P11,500
compounding is continuous, what is the effective D. P12,500
interest rate per year?
A. 0.127% C. 1.000% 14. TSU installed a new equipment that cost P150,000 and
B. 11.275% D. 12.75% is estimated to have a useful life of 10 years. It is
estimated to have a scrap value at the end of its useful
5. By the conditions of a will, the sum of P25,000 is left to life of P5,000. If the interest is 12% compounded
a girl to be held in trust by her guardian until it annually, determine its capitalized cost.
amounts to P45,000. When will the girl receive the A. P310,254.67
money if the fund is invested at 8 percent compounded B. P218,855.87
quarterly? C. P281,425.76
A. 6th birthday C. 7th birthday D. P301,425.76
B. 8 birthday
th D. 9th birthday
15. A machine is purchased for P100, 000. If the annual
6. What is the future worth of P12,000 deposited in an maintenance cost is P18,000, determine the capitalized
account earning interest at the rate of 9% compounded cost of perpetual service with an interest rate of 8%.
quarterly for 8 years. A. P325,000
A. 20,500.23 C. 24,457.24 B. P523,000
B. 25,400.56 D. 23,642.56 C. P235,000
D. P532,000
7. Raphael Asher possesses a promissory note whose
maturity value is P6700, due in 3 years hence. If the rate 16. An equipment costs P480,000 and has a salvage value of
of interest is 10% compounded semi-annually, what is 10% of its cost at the end of its economic life of 35,000
the value of this note now? operating hours. In the first year, it was used for 4,000
A. 4,000 C. 6,000 hours. Determine its book value at the end of the first
B. 3,000 D. 5,000 year using straight line method.
A. 430,629
8. A P2,000 loan was originally made at 8% simple B. 403,269
interest for 4 years. At the end of this period, the loan C. 340,296
was extended for three years without the interest being D. 304,629
paid, this time at a rate of 10% compounded semi-
annually. How much should the borrower pay at the end 17. A printing equipment costs P 73,500 has a life
of 7 years? expectancy of 8 yrs. and has a salvage value of P 3500 at
A. 3,574 C. 2,537 the end of its life. The book value at the end of “x” years
B. 3,537 D. 2,573 is equal to P 38,500. Using straight line method of
depreciation, solve for the value of “x”.
9. How long will it take for an investment to double its A. 5 years
amount if invested at an interest rate of 6% B. 6 years
compounded monthly? C. 4 years
A. 10 years C. 13 years D. 3 years
B. 12 years D. 14 years
18. TSU purchased an equipment that costs P7,000, last 8
10. Engr. Anne, 22 years old, has just passed the board years and has a salvage value of P350. determine the
exam. She accepts a good job and desires to establish book value during the 4th year using declining balance
her own retirement fund. At the end of each year method.
thereafter she plans to deposit P2,000 in a fund at 15% A. P1,711
annual interest. How old will she be when the fund has B. P5,166
an accumulated value of P 1M. C. P1,565
A. 51 C. 53 D. P1,645
B. 52 D. 54

11. 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. P8,507 C. P7,690
B. P9,568 D. P6,759

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Prepared by: Engr. Rex Jason H. Agustin
 TARLAC STATE UNIVERSITY Engineering Economics
19. A telephone company purchased a microwave radio 29. A plant bought calciner for P220,000 and used it for 10
equipment for P6M. Freight and installation charges years, the life span of the equipment. What is the book
amounted to 3% of the purchase price. If the equipment value of the calciner after 5 years of use. Assume a scrap
shall be depreciated over a period of 8 years with a value of P20,000 for the double declining balance
salvage value of 5% of the purchase price, determine method.
the depreciation charge during the fifth year using the A. P120,000
sum of the years digit method. B. P72,090
A. 563,444.33 C. 635,333.33 C. P65,570
B. 653,333.33 D. 536,444.44 D. P56,570

20. A market situation where there is one seller and buyer. 30. A man wishes to have Php 40,000 in a certain fund at
A. Bilateral monopoly C. Oligopoly the end of 8 years. How much should he invest in fund
B. Monopoly D. Bilateral Monopsony that will pay 6% compounded continuously?
A. Php 27,857.34
21. It is an amount which a willing buyer will pay to a B. Php 24,751.34
willing seller for the property where each has equal C. Php 24,000.05
advantage and is under no compulsion to buy or sell. D. Php 25,770.00
A. Book value C. Use value
B. Market value D. Fair value
TO GOD TBE THE GLORY!
22. _______ is the loss of value of the equipment with use
over a period of time. It could mean a difference in value
between a new asset and the use asset currently in a
service.
A. Loss C. Extracted
B. Depreciation D. Gain

23. An economic condition in which there are so few

suppliers of a particular product that one supplier’s
actions significantly affect prices and supply.
A. Oligopoly C. Monopoly
B. Monopsony D. Perfect competition

24. A market whereby there is only one buyer of an item for

when there are no goods substitute.
A. Monopsony C. Oligopoly
B. Monopoly D. Oligopsony

25. A manufacturer produces certain items at a labor cost

per unit of P315, material cost per unit of P100, and a
variable cost of P3.00 per unit. If the item has a selling
price of P995, how many units must be manufactured
each month for the manufacturer to break even if the
monthly overhead is P461,600.
A. 500 C. 600
B. 700 D. 800

26. ABC Corporation manufactures book cases that sells for

P65.00 each. It costs ABC P35,000 per year to operate
its plant. This sum includes rent, depreciation charges
on equipment and salary payments. If the cost to
produce one bookcase is P50, how many bookcases
must be sold each year for ABC to avoid taking a loss?
A. 2334 C. 3234
B. 3243 D. 2344

27. With straightforward use of the gradient conversion

factors, find the present equivalent value at the
beginning of the first year of a certain end-of-year cash
flows that are expected to be P1,000 for the second
year, P2000 for the third year, and P3,000 for the fourth
year and that, if interest is 15% per year.
A. 2,786 C. 4,786
B. 3,786 D. 5,786

28. A loan was to be amortized by a group of four end-of

year payments forming an arithmetic progression. The
initial payment was to be P5,000 and the difference
between successive payments was to be P400. But the
loan was renegotiated to provide for the payment of
equal rather than uniformly varying sums. If the
interest rate of the loan was 15%, what was the annual
payment?
A. P4530.51 C. P6530.51
B. P5530.51 D. P7530.51

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Prepared by: Engr. Rex Jason H. Agustin