Engineering Economy and Accounting
Engineering Economy and Accounting
Engineering Economy and Accounting
..PROBLEMS..PROBLEMS..PROBLEMS..PROBLEMS
PROBLEMS..PROBLEMS..PROBLEMS..PROBLEMS..
Present Economy
1. An electrical contractor has a job which should
be completed in 100 days. At present, he has
80 men on the job and it is estimated that they
will finish the work in 130 days. If of the 80
men, 50 are paid P190 a day, 25 at P220 a
day, and 5 at P300 a day and if for each day
beyond the original 100 days, the contractor
has to pay P2,000 liquidated damages: How
many more men should the contractor add so
he can complete the work on time?
ENGINEERING ECONOMY AND ACCOUNTING SALIBA, HARROLD
EE543-B7 SAMONTE, DANDREB
Present Economy (solutions)
1. Let x = # of men to be added to complete
the job on time
The wage of the lathe operator is P50.00 per hour, based on actual
working hours. The tool changer costs P60.00 per hour. Overhead
costs for the lathe are P45.00 per hour, including tool-change time.
A set of unsharpened high carbon steel costs P500 and can be
ground ten times; a set of unsharpened alloy steel costs P850 and
can be ground five times. Which type of steel should be used?
I = Pni = (P700)(255/360)(0.15)
= P74.38
292
Exact simple interest = P500 x 366 x 0.16 P63.83
14
F P1 ni P10,0001 0.12 P11,400
12
I = Pni = (P343)(96/360)(0.02)
= P1.30
171
Exact simple interest = P793.25 x x 0.05 P18.53
366
ENGINEERING ECONOMY AND ACCOUNTING SALIBA, HARROLD
EE543-B7 SAMONTE, DANDREB
Simple interest
6. Determine the future worth of money
after 6 months, if a sum of P65,500 is
invested today at a simple interest rate of
13% per year?
6
F P1 ni P65,5001 0.13 P69,757.5
12
F=P+I
F = 8000 + 657.50
F = Php 8,657.50
F P (1 i ) n
F 5000(1 .10) 20
F 33,637.50
ENGINEERING ECONOMY AND ACCOUNTING SALIBA, HARROLD
EE543-B7 SAMONTE, DANDREB
Compound Interest
6. What is the present worth of a future
payment of 19,457.25 to be made in 5
years with an interest of 15%
compounded annually?
19,457.25
P
(1 .15)5
P 9,673.69
ENGINEERING ECONOMY AND ACCOUNTING SALIBA, HARROLD
EE543-B7 SAMONTE, DANDREB
Compound Interest
7. Determine the rate of interest
compounded annually which is the same
as the rate of interest of 18%
compounded quarterly.
FB 24,800.00
FF FB
25,364.84 24,800.00
564.84LessByBorrowingFromT heBank!
ENGINEERING ECONOMY AND ACCOUNTING SALIBA, HARROLD
EE543-B7 SAMONTE, DANDREB
Annuity
1. What are the present worth and the
accumulated amount of a 10-year annuity
paying P10,000 at the end of each year,
with interest at 15% compounded
annually?
i 0.0296or 2.96%
P A( P / A,2.96%,24)
1 (1 0.0296) 24
P500
0.0296
P8,504
ENGINEERING ECONOMY AND ACCOUNTING SALIBA, HARROLD
EE543-B7 SAMONTE, DANDREB
Annuity
3. A businessman needs P50,000 for his
operations. One financial institution is
willing to lend him the money for one year
at 12.5% interest per annum (discounted).
Another lender is charging 14%, with the
principal and interest payable at the end of
one year. A third financer is willing to lend
him P50,000 payable in 12 equal monthly
installments of P4,600. which offer is best
for him?
ENGINEERING ECONOMY AND ACCOUNTING SALIBA, HARROLD
EE543-B7 SAMONTE, DANDREB
Annuity (solutions)
3. 1 ST offer: 3rd offer:
d 12.5% P / A, i %,12
P 50000
A 4600
d 0.125
i 14.29% / year 1 (1 i ) 12
1 d 1 0.125 10.8696
i
2nd offer: i 1%
1 (1 .01) 12
P50,000 11.2551
Effective rate = 14% .01
i 2%
0 1 1 (1 .02) 12
10.5753
.02
x 0.3855
1% 0.6798
P50,000(1.14)
x 0.57
i 1% 0.57% 1.57% / month
The second offer is the BEST!
rate(effective ) (1 .0157)12 20.26%
1 P8,000
2 7,000
3 6,000
4 5,000
(1 .15)4 1
P 8000[ ]
(1 .15) (.15)
4
P 22,839.83
GRADIENT :
1000 (1 .15)4 1 4
P [ ]
.15 (1 .15)4 (.15) (1 .15)4
P 3,786.44
subtract :
P P( gradient )
22,839.83 3786.44
By Re nting 19,053.39
ItIsAdvisa bleTo Re ntTheMachine!
ENGINEERING ECONOMY AND ACCOUNTING SALIBA, HARROLD
EE543-B7 SAMONTE, DANDREB
Gradient
4. A loan was to be amortized by the yuchengco
group end-of-year payments forming an
ascending arithmetic progression. The initial
payment was to be P15,000 and the difference
between successive payments was to be P550.
But the loan was renegotiated to provide for the
payment of equal rather than uniformly varying
sums. If the interest rate of the load was 23%,
what was the annual payment?
(1 .23)4 1
P 12000[ ]
(1 .23) (.23)
4
P 29,379.26
GRADIENT :
1500 (1 .23)4 1 4
P [ ]
.23 (1 .23)4 (.23) (1 .23)4
P 4,569.66
subtract :
P P( gradient )
29,379.26 4,569.66
By Re nting 24,809.60
ItIsAdvisa bleTo Re ntTheMachine!
ENGINEERING ECONOMY AND ACCOUNTING SALIBA, HARROLD
EE543-B7 SAMONTE, DANDREB
Gradient
6. Find the equivalent annual payment of the
following obligations at 10% interest.
1 P4,000
2 3,000
3 2,000
4 1,000
A P0 ( A / P,15%,4)
A 3790(.3503)
A P1,326.30
ENGINEERING ECONOMY AND ACCOUNTING SALIBA, HARROLD
EE543-B7 SAMONTE, DANDREB
Gradient
10. Suppose that we have cash flows as
follows: End of Year
Cash flows
(P)
1 -5,000
2 -6,000
3 -7,000
4 -8,000
b)
Co CL 60000 6000
d P1,263
F / A,12%,16 42.7533
D12 d ( F / A,12%,12) 1263(24.1331) P30,480
C12 Co D12 60000 30480 P 29,520
CL P 2,000 k 1 L
CL
1 10
2000
0.1825or18.25%
Co 15000
L 10
n8 C8 C 0(1 k )8 15000(1 .1825)8 P 2992
D8 Co C8 15000 2992 P12,008
b)
2 2
Rate 0.2or 20%
L 20
8 8
2 2
C8 Co 1 150001 P 2,517
l 10
D8 C0 C8 15000 2517 P12,483
2 4 (4/15)(11000)=2933 5400
3 3 (3/15)(11000)=2200 3200
4 2 (2/15)(11000)=1467 1733
5 1 (1/15)(11000)=733 1000
Sum of
Digits=15
- 20
1 - (1.04)
P5 105(1.04) - 20
.04
P 115.87
Answer : 115.87
25
1.02n
1136.78 -
0.02 12.5
1 1 . 02 40
10001.02
40
25 0.02
1000 -
0.02
n 40
P2 $794.83
1 1.08
10
10001.02
10
40
0.08
This is the investment at the end of the year. The investor will receive the amount
of $1000 at the end of 10 years, and will have the accumulated value A of the
coupon payments in the savings account:
A Frs100.03 40
1.03 1
10
0.03
The investor’s yield on the transaction therefore is
1
A 1000 10
1 7.14%
P
Answer : 7.14%
ENGINEERING ECONOMY AND ACCOUNTING SALIBA, HARROLD
EE543-B7 SAMONTE, DANDREB
Bond
4. A $100 par value 12-year bond with semiannual
coupons at coupon rate 10% is selling for $110.
Find the annual effective yield rate, convertible
semiannually.
1 1 i
24
1001 i
24
110 5
i
The solution is 4.32%. The nominal annual rate of interest,
convertible semiannually, therefore is 8.64%.
Answer: 8.64%
1 1.0375
9
10001.0375
9
P1 30
0.0375
2
P1 Fr
1 3.19%
P0
Answer : 3.19%
5
20
0.25
Answer : 20