Republic of the Philippines

PHINMA – Araullo University

Cabanatuan City
NAME: .
SECTION: .
ECO 017 – ENGINEERING ECONOMICS

INSTRUCTION: Select the correct answer for each of the following questions. Mark only one answer
for each item by encircle the corresponding letter of your choice. ALSO, PROVIDE A COMPLETE AND
CLEAR SOLUTION WITH APPROPRIATE ILLUSTRATIONS AND WRITE IT ON YOUR TEST
BOOKLET. Express your FINAL ANSWER IN 2 DECIMAL PLACES WITH CORRECT UNITS AND
BOX IT.
NOTE:
1. A times B is represented by AxB or A*B. A raised to the power n is expressed as A^n.
2. No borrowing of calculators.
3. STRICTLY NO ERASURES ALLOWED.
4. Solve the problems accordingly.
5. Do not detach this test paper.

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SITUATION 1 - A printing machine is bought at P 1.5M and is estimated to have a salvage value of P
100,000 after 500,000 copies. The annual cost of renting the space for the business is P 80,000, power cost per
copy is P 1.50, and the maintenance and paper cost is P 4.00. The expected annual production of the machine
is 100,000 copies. Annual interest is 15%
1. Determine the annual operation cost and maintenance cost of the machine
a. P 680,000 c. P 560,000
b. P 630,000 d. P 720,000
2. Determine the annual depreciation of the machine
a. P 207,642 c. P 321,478
b. P 256,325 d. P 187,445
3. Determine the production cost per copy
a. P 15.68 c. P 10.63
b. P 21.54 d. P 12.89

4. Engr. Manuel has received Php 50,000 from her employer for a patent disclosure. She has decided to invest
the money in a 15-year saving certificate that pays 8% per year, compounded annually. What will be the final
value of her investment, in terms of today’s peso, inflation continues at the rate of 6% per year.
a. Php 78,563.25 c. Php 66,181.77
b. Php 95,452.25 d. Php 158,608.46
5. A mine is for sale. Engr. Tiamzon estimates that, at current production levels, the mine will yield an annual net
income of Php 8M for 15 years, after which the mineral will be exhausted. If an investor's MARR is 16%, what is
the maximum amount he can bid on this property?
a. Php 64.4M c. Php 48.4M
b. Php 46.4M d. Php 44.6M
6. Engr. Comighod wishes to purchase an Php 900,000 home by making a downpayment of Php 200,000 and
borrowing the remaining Php 700,000, which he will repay on a monthly basis over the next 20 years. If the bank
charges interest at the rate of 9.5% per year, compounded monthly, how much money must Engr. Comighod
repay each month?
a. Php 6,524.92 c. Php 6,854.72
b. Php 6,455.12 d. Php 7,365.36
7. The first cost of a machine is Php 1,800,000 with a salvage value of Php 400,000at the end of 5 yrs. Determine
the total depreciation after 3 years using Sum of the Year’s Digits Method.
a. Php 1,200,000 c. Php 1,120,000
b. Php 280,000 d. Php 1,300,000
8. Engr. Evangelista is thinking of starting a part-time consulting business next September 5, on his 40th birthday.
He expects the business to require an initial cash outlay of Php 5,000, to come from his savings, and will cost
Php 500 per year to operate; the business ought to generate Php 2,000 per year in cash receipts. During the 20
years that he expects to operate the business, he plans to deposit the annual net proceeds in a bank each year,
at an interest rate of 8% per year, compounded annually. When he retired, on 60th birthday, Engr. Evangelista
expects to invest whatever proceeds plus interest he then has from the business in a long-term savings plan that
pays 10% per year, compounded annually. What is the maximum amount he could withdraw from the savings
plan each year during his retirement and still have the funds last 15 years?
a. Php 5,960.59 c. Php 5,456.54
b. Php 6,204.25 d. Php 7,254.85
9. A fixed capital investment of Php 10,000,000 is required for a proposed manufacturing plant and an estimated
working capital of Php 2,000,000. Annual depreciation is estimated to be 10% of the fixed capital investment.
Determine the rate of return on the total investment if the annual profit is Php 2,500,000.
a. 21.36% c. 20.83%
b. 21.87% d. 22.98%
10. Lacanaria Oil Company is considering the purchase of a new machine that will last 5 years and cost Php
50,000; maintenance will cost Php 6,000 the first year, decreasing by 1,000 each year to Php 2,000 the fifth
year. If the interest rate is 8% per year, compounded annually, how much should the company set aside for this
machine?
a. Php 63,586.49 c. Php 66,583.49
b. Php 65,683.49 d. Php 68,349.86
11. How long must a temporary warehouse last to be a desirable investment if it costs Php 1.6M to build, has
annual maintenance and operating costs of Php 36,000, provides storage space valued at Php 360,000 per year,
and if the company MARR is 10%?
a. 20 yrs c. 10 yrs
b. 15 yrs d. 36 yrs
12. Cabanatuan City is considering a new Php 5M street cleaner. The new machine will operate at a savings of
Php 60,000 per day compared to the present equipment. Assume the rate is 12% and the machine life is 10
years with zero resale value at the time. How many days per year must the machine must be used to justify the
investment?
a. 10 days c. 12 days
b. 15 days d. 13 days
13. A commercial bank offers long term savings certificates at 8.5% per year, compounded continuously. If a 12-
year certificate costs Php 50,000. What will be its value at maturity?
a. Php 138,660 c. Php 143,520
b. Php 135,230 d. Php 140,320
14. A man made a time deposit of Php 500,000 with BDO that pays 9% per year, compounded annually. Compute
the maximum withdrawal at the end of each year for 12 years.

Present Worth Factor Sinking Fund Factor Capital Recovery Factor Gradient Uniform Series
(P/F,i,n) (A/F,i,n) (A/P,i,n) (A/G,i,n)

0.3555 0.0497 0.1397 4.491

i = 9%
n = 12
a. Php 69,850 c. Php 68,960
b. Php 68,560 d. Php 69,920
15. GARCIA Corporation invested Php 4 million on equipment that will save the company Php 1.8 million annually
for 9 years. If the minimum attractive rate of return (MARR) is 12%, what is the present worth of all the savings?

Present Worth Factor Compound Amount Capital Recovery Factor Gradient Uniform Series
(P/A,12%,9) Factor (A/P,12%,9) (P/G,12%,9)
(F/A,12%,9)

5.3283 0.0497 0.1397 4.491

a. Php 9,590,940 c. Php 9,950,490

b. Php 9,490,590 d. Php 9,990,590
16. Php 210,000 was invested on the project that yields an annual benefit of Php 80,000 for 8 years with no
salvage value. Calculate the benefit-cost ratio of money is 6%. (Hint: BCR = PA/P)
a. 1.896 c. 2.245
b. 2.366 d. 1.992
17. The repair cost of copier machine is estimated to be Php 1,200 the first year, increasing by Php 300 per year
in the subsequent years. Determine the amount that the office will need to deposit into a bank account, paying
4% interest to provide for the repair cost for the five year.

Present Worth Factor Sinking Fund Factor Capital Recovery Factor Gradient Uniform Series
(P/A,4%,5) (A/F,4%,5) (A/P,4%,5) (P/G,4%,5)

4.4518 0.1846 0.2246 8.555

a. Php 7,863 c. Php 8,102

b. Php 6,896 d. Php 7,909
18. The cost of producing x number of cellular phones is given by C = 4.5x + 3600 and revenue R from selling
them is given by R = 16.5x. Find the number of cellular phones that must be sold to break even
a. 300 c. 350
b. 250 d. 400
19. What is the equivalent interest of money compounded monthly and money at 14% compounded quarterly?
a. 14.38% c. 13.84%
b. 13.48% d. 14.38%
20. How long does it take an investment of Php 200,000 to double if it is invested at 5% interest compounded
quarterly?
a. 14 years c. 18 years
b. 15 years d. 20 years
21. Given the following maintenance cost for a bridge
End of 5th year = Php 100,000
End of 10th year = Php 200,000
End of 15th year = Php 300,000
What is the equivalent uniform annual cost of these maintenance over a 20 year period if money is worth 8%
annually?
a. Php 30,000 c. Php 26,000
b. Php 28,000 d. Php 22,000
22. An equipment costing Php 50,000 is expected to have a salvage value of Php 5,000 after its 10 years of
service. What is the annual capital recovery amount if invested at 8% annually?
a. Php 7,106 c. Php 7,160
b. Php 7,601 d. Php 7,016
23. A machine costing Php 1.8M has a salvage value of Php 300,000 after 5 years. Calculate the depreciation
value (book value) at the end of 3 years using straight-line method
a. Php 900,000 c. Php 600,000
b. Php 1,500,000 d. Php 1,200,000
24. A manufacturing company has a production capacity of 600,000 units with an income of Php 720,000. The
company’s fixed expenses is Php 250,000 and the cost to produce per unit is Php 0.70. Compute the number of
units to break-even
a. 500,000 c. 550,000
b. 450,000 d. 400,000
25. In 1626, Ivan Fernandez convinced Patrick Sabino to sell him the Siguen Island for Php 24. If he had to put
the Php 24 into a bank account paying 5% interest, how much would the investment be worth in the year 2000
if the interest were compounded monthly?
a. Php 3,052,428,614 c. Php 3,252,428,614
b. Php 3,152,428,614 d. Php 3,552,428,614
26. Engr. Dela Cruz has just borrowed Php 800,000 from a local bank, at the rate of 1% per month on the unpaid
balance. His contract states that he must repay the loan in 36 equal monthly installments. How much money
must he repay each month?
a. Php 27,587.49 c. Php 26,571.25
b. Php 30,556.12 d. Php 25,365.78
27. HEMENTERRA Corporation’s stock which currently sells for Php 500 per share, has been paying a Php 30
annual dividend per share and increasing in value at an average rate of 5% per year, over the last 5 years. It is
expected that the company’s stock will maintain this performance over the next 5 years. What is the company’s
cost of capital raised through the selling of this stock?
a. 12.36% c. 10.68%
b. 14.25% d. 10.48%
28. Determine the approximate size of an annual payment needed to retire Php 60,000,000 in bonds issued by
a city to build a dam. The bonds must be repaid over a 50-year period, and they earn interest at an annual rate
of 6% compounded annually.
a. Php 3,810,000 c. Php 4,125,000
b. Php 3,540,000 d. Php 4,326,000
29. Mr. Asuncion wants to set aside money for his 5-year old son’s future college education. Money can be
deposited in a bank account that pays 8% per year, compounded annually. What is the equal deposits should
be made by Mr. Asuncion, on his son’s 6th through 17th birthdays, in order to provide Php 80,000 on his son’s
18th, 19th, 20th and 21st birthday?
a. Php 12,547 c. Php 15,589
b. Php 14,228 d. Php 13,963
30. Ms. Buenaventura invested a capital of Php 90,000 for a buy and sell business. She estimated to have a
gross income of Php 28,000 annually and an operating cost of Php 5,000 annually. It is assumed the business
to have a life of 10 years. If the rate of interest is 12% compute the benefit cost ratio. (Hint: BCR = P A/P)
a. 1.136 c. 1.338
b. 1.444 d. 1.586
31. An equipment cost Php 480,000 and has a salvage value of 16% of its cost at the end of its life of 36,000
operating hours in a period of 5 years. In the first year of service, it was used for 12,000 hours. If at the end of
the second year it was used for 15,000 hours, find the depreciation at the end of second year.
a. Php 134,400 c. Php 256,600
b. Php 302,400 d. Php 254,700
32. The planning department of Abstract Office Supplies has been asked to determine whether the company
should introduce a new computer desk next year. The department estimates that Php 60,000 of new
manufacturing equipment will need to be purchased and that the cost of constructing each desk will be Php
2,000. The department also estimates that the revenue of each desk will be Php 4,500. Determine the revenue
R(x) from the sales of x desk.
a. 4500x c. 6500x
b. 2500x d. 5500x
33. Engr. Gutierrez wishes to earn 7% on her capital after payment of taxes. If the income from an available
investment will be taxed at an average rate of 45%, what minimum rate of return before payment of taxes must
the investment offer be justified?
a. 10.36% c. 12.73%
b. 14.52% d. 13.65%
34. A price increases 10% due to inflation and is then reduced 12% for a sale. Express the final price as a
function of the original price, P.
a. 0.824P c. 0.922P
b. 0.925P d. 0.968P
35. If money is invested at a nominal rate of Interest of 9% for a period of 5 years, what is the value of the
compound amount factor if it is compounded continuously?
a. 1.458 c. 1.568
b. 1.632 d. 1.365
36. An equipment costing Php 2.1M has a salvage value of Php 840,000 at the end of its economic life. Find its
economic life using the SOYD method of depreciation, its book value at the end of two years is Php 1,440,000.
a. 8 yrs c. 4 yrs
b. 5 yrs d. 6 yrs
37. The following alternatives are to be compared based on an 8% interest rate.
Machine A B
First Cost 5,000 10,000
Annual maintenance cost 500 200
Salvage value 600 1,000
Useful life (years) 5 12
What is the equivalent uniform annual cost (EUAC) of machine A?
a. 1474 c. 1650
b. 1385 d. 1720
38. Mr. Diego makes and sells certain spare parts at Php 5.00 per pc. The volume of sales per year is Php
500,000 units. The fixed expense per year is Php 800,000. Compute the cost per unit to break-even
a. Php 2.40 c. Php 3.40
b. Php 4.80 d. Php 1.60
39. The revenue of selling N number of computer units is R = 80N and the cost to produce them is C = 60N +
10,000. How many computer units must be sold to break-even?
a. 400 c. 500
b. 800 d. 600
40. A telephone company purchased microwave equipment for Php 6M with a salvage value of Php 600,000
over a period of 5 years and paid a lump sum of Php 400,000 for maintenance cost. Minimum attractive rate of
return is 16% annually. Compute the annual cost of investment of purchasing the microwave equipment.
a. Php 1,592,362.54 c. Php 1,803,374.41
b. Php 1,695,452.87 d. Php 1,346,121.25
41. Determine the equivalent effective rate of money compounded continuously at r = 5%
a. 5.13% c. 5.02%
b. 5.26% d. 4.82%
42. Ms. Lopez wishes to raise Php 1.5 million in five years by investing a fixed amount of money every end of
the year for three years. What is the required investment using an interest rate of 8%?
a. Php 635,740 c. Php 475,360
b. Php 547,630 d. Php 396,134
43. Determine the capitalized cost of a large-format printer that has a first cost of Php 1.20 million and salvage
value after five useful years equal to Php 600,000. The operation and maintenance cost Php 100,000 every 3
years. Use interest rate, i = 10.1%
a. Php 2.47 M c. Php 3.41 M
b. Php 2.56 M d. Php 2.89 M
44. A machine costing Php 1.5 M has a salvage value of Php 600,000 at the end of its economic life. What is the
economic life of this machine if using the sum-of-the-years-digit method, its book value at the end of 2 years is
estimated to be 870,000?
a. 4 c. 6
b. 5 d. 7
45. A machine costing Php 1.2 million has an estimated book value of Php 300,000 at the end of its economic
life in five years. Using the Sum of the Digits method, what will be its book value in the third year?
a. Php 720,000 c. Php 480,000
b. Php 520,000 d. Php 610,000
46. An equipment with a first cost of Php 1.80 M has a salvage value of Php 300,000 at the end of 5 years. Using
the Declining Balance method, what is the total depreciation after three years?
a. Php 591,723 c. Php 985,365
b. Php 614,302 d. Php 1,185,691
47. A Php 1,000 was made at 10% simple annual interest. Which of the following gives the time in years for the
amount of the loan and interest to be equal to Php 1,700?
a. 5 c. 7
b. 6 d. 8
48. The first cost of a machine is Php 1,800,000 with a salvage value of Php 300,000 at the end of its life of 5
years. Determine the book value after 3 years using Double Declining Balance Method
a. Php 900,000 c. Php 600,000
b. Php 614,375.5 d. Php 735,256.4
49. Suppose Engr. Cunanan receives an initial annual salary of Php 60,000, increasing at the rate of Php 5,000
a year. If money is worth 10%, determine his equivalent uniform salary for a period of 8 years.
a. Php 75,022.39 c. Php 65,264.75
b. Php 79,236.75 d. PHp 68,242.46
50. Annual maintenance costs for machines are Php 1,500 this year and are estimated to increase 10% each
year every year. What is the present worth of the maintenance cost for six years if i = 12%
a. Php 8,728.79 c. Php 8,181,82
b. Php 7,363.36 d. Php 7,685.40
51. Amounts A and B, with a total of 1 Million Pesos were invested in two banks, better and best respectively.
The better bank offers 4% interest rate and the best bank with 4.2% interest rate. If the gained interest after one
year is Php 41,200, how much was invested in the better bank?
a. Php 480,000 c. Php 600,000
b. Php 330,000 d. Php 400,000
52. If you fail the board exam, you would invest money in a business that earns money equivalent to 5% interest
compounded quarterly. How many years will the amount triple?
a. 24 c. 20
b. 22 d. 26
53. Determine the number of years needed for Php 500,000 to become One Million Pesos. The money is invested
at 4% simple interest.
a. 15 c. 25
b. 20 d. 30
54. How many years will a money worth Php 500,000 to become Php 1,000,000 if it is accumulated in 4% interest
compounded quarterly?
a. 17.5 years c. 15 years
b. 14.5 years d. 20 years
55. How much should be invested in order to have 20,000 annual incomes if the annual interest rate is 8%?
a. Php 500,000 c. Php 375,000
b. Php 250,000 d. Php 400,000
56. A man puts Php 20,000 per year in a mutual fund that earns 6% per year. How long will it take for the amount
in the fund to become Php 2 M?
a. 33.4 years c. 26.5 years
b. 21.7 years d. 18.7 years
57. Php 4,000 is borrowed for 75 days at 16% per annum simple interest. How much will be due at the end of
75 days?
a. Php 4,133.33 c. Php 4,333.33
b. Php 1,666.67 d. Php 4,150.00
58. Mr. Soleta was granted a loan of Php 20,000 by his employer CPM Industrial Fabrication and Construction
Corporation with an interest of 6% for 180 days on the principal collected in advance. The corporation would
accept a promissory note for PHp 20,000 non-interest for 180 days. If discounted at once, find the proceeds of
the note.
a. Php 18,600 c. Php 18,800
b. Php 19,000 d. Php 19,200
59. Tulali Bank advertises a 9.5% account that yields 9.84% annually. Find how often the interest is compounded.
a. Daily c. Monthly
b. Bi-monthly d. Quarterly
60. Engr. Santos owes Php 25,000.00 due in 1 year and Php 75,000 due in 4 years. He agrees to pay Php
50,000.00 today and the balance in 2 years. How much must he pay at the end of two years if money is worth
5% compounded semi-annually?
a. Php 38,025.28 c. Php 35,021.25
b. Php 30,500.25 d. Php 39,021.28
61. At an interest rate of 10% compounded annually, how much will a deposit of Php 1,500 be in 15 years?
a. Php 6,100.00 c. Php 6,234.09
b. Php 6,265.87 d. Php 6,437.90
62. Ms. Jimenez borrows Php 3,500 for one year from her friend, Mr. Dayao, at an interest rate of 1.5% per
month instead of taking a loan from a bank at a rate of 18% per year. Compare how much money she will save
or lose on the transaction
a. She will pay Php 155.00 more if she borrowed from the bank
b. She will save Php 55.00 by borrowing from her friend
c. She will pay Php 85.00 more if she borrowed from the bank
d. She will save Php 55.00 more if she borrowed from the bank
63. What is the present worth of two Php 100 payments at the end of the third year and fourth year? The annual
interest rate is 8%
a. Php 153 c. Php 160
b. Php 162 d. Php 127
64. How much must be deposited at 6% each year beginning on January 1, year 1, in order to accumulate Php
5,000 on the date of the last deposit, January 1, year 6?
a. Php 751 c. Php 717
b. Php 715 d. Php 725
65. Ms. Cuevo bought a brand new washing machine costing Php 12,000 if paid in cash. However, she can
purchase it on an installment basis to be paid within 5 years. If money is worth 8% compounded annually, what
is her yearly amortization if all payments are to be made at the beginning of each year?
a. Php 2,782.85 c. Php 2,872.58
b. Php 2,400.00 d. Php 2,827.58
66. A house and lot can be acquired by a downpayment og Php 500,000 and a yearly payment of Php 100,000
at the end of each year for a period of 10 years, starting at the end of 5 years from the date of purchase. If money
is worth 14% compounded annually, what is the cash price of the property?
a. Php 810,000 c. Php 808,836
b. Php 801,900 d. Php 805,902
67. Find the present value in pesos of a perpetuity of Php 15,000 payable semi-annually if money is worth 8%
compounded quarterly
a. Php 372,537 c. Php 374,977
b. Php 373,767 d. Php 371,287
68. A unit of a welding machine cost Php 45,000 with an estimated life of 5 years. Its salvage value is Php 2,500.
Find its depreciation rate by straight-line method.
a. 17.75% c. 19.88%
b. 18.89% d. 15.56%
69. An asset is purchased for Php 500,000.00. The salvage value in 25 years is Php 100,000.00. What is the
total depreciation in the first three years using the straight-line method?
a. Php 48,000 c. Php 24,000
b. Php 32,000 d. Php 16,000
70. At 6%, find the capitalized cost of a bridge whose cost is Php 250 M and life is 20 years, if the bridge must
be partially rebuilt at a cost Php 100 M at the end of each 20 years.
a. Php 275.3 M c. Php 265.5 M
b. Php 295.3 M d. Php 282.1 M

71. A company must relocate one of its factories in three years. Equipment for the loading dock is being
considered for purchase. The original cost is Php 20,000, the salvage value of the equipment after three years
is Php 8,000. The company's rate of return on the money is 10%. Determine the capital recovery rate per year.
a. Php 5,115 c. Php 4,946
b. Php 5,625 d. Php 4,805
72. The annual maintenance cost of a machine shop is Php 69,994. If the cost of making a forging is Php 56 per
unit and its selling price is Php 135 per forged unit, find the number of units to be forged to break-even.
a. 886 units c. 885 units
b. 668 units d. 688 units
73. JRT Industries manufactures automatic voltage regulators at a labor cost of Php 85.00 per unit and material
cost of Php 350.00 per unit. The fixed charges on the business are P 15,000 per month and the variable costs
are Php 20.00 per unit. If the automatic voltage regulators are sold to retailers at Php 580.00 each, how many
units must be produced and sold per month to breakeven?
a. 104 c. 200
b. 120 d. 150
74. The annual maintenance cost of a machine is P 70,000. If the cost of making a forging is Php 56 and its
selling price is Php 125 per forged unit. Find the number of units to be forged to break even.
a. 1015 units c. 985 units
b. 1100 units d. 1000 units
75. A company which manufactures electric motors has a production capacity of 200 motors a month. The
variable costs are Php 150.00 per motor. The average selling price of the motors is Php 275.00. Fixed costs of
the company amount to P 20,000 per month which includes taxes. The number of motors that must be sold each
month to break even is closest to:
a. 40 c. 150
b. 80 d. 160