MCQs in Engineering Economics Part XXV

MCQs in Engineering Economics

This is the Multiples Choice Questions Part 25 of the Series in Engineering Economics as one of the General Engineering and Applied Sciences (GEAS) topic. In Preparation for the ECE Board Exam make sure to expose yourself and familiarize in each and every questions compiled here taken from various sources including past Board Questions in General Engineering and Applied Sciences (GEAS), Engineering Economy Books, Journals and other Engineering Economy References.

Online Questions and Answers in Engineering Economics Series

Following is the list of multiple choice questions in this brand new series:

Engineering Economics MCQs
PART 1: MCQs from Number 1 – 50                        Answer key: PART I
PART 2: MCQs from Number 51 – 100                   Answer key: PART II
PART 3: MCQs from Number 101 – 150                 Answer key: PART III
PART 4: MCQs from Number 151 – 200                 Answer key: PART IV
PART 5: MCQs from Number 201 – 250                 Answer key: PART V
PART 6: MCQs from Number 251 – 300                 Answer key: PART VI
PART 7: MCQs from Number 301 – 350                 Answer key: PART VII
PART 8: MCQs from Number 351 – 400                 Answer key: PART VIII
PART 9: MCQs from Number 401 – 450                 Answer key: PART IX
PART 25: MCQs from Number 1201 – 1250                 Answer key: PART XXV

Continue Practice Exam Test Questions Part XXV of the Series

Choose the letter of the best answer in each questions.

1201. A certain machine cost P40,000 and has a life of 4 years and a salvage value of P5000. The production output of this machine in units per year is first year 1800 units, second year2200 units, third year 3000, and fourth year 4000 units. If the units produced are of uniform quality, what is the depreciation charge at the end of 4th year?

  • a. P12,727.27
  • b. P15,350.23
  • c. P16,420.43
  • d. P17,200.98

1202. A lathe machine cost P300,000 with a salvage value of P15,000 is expected to last for 285000 hours in a period of 5 years. In the first year of service it was used for 8000 hours. Compute the book value of the machine at the end of the first year.

  • a. P292,000
  • b. 200,000
  • c. P250,000
  • d. P323,000

1203. A machine costing P280,000 has a useful life of 20,000 hrs. at the end of which its salvage value is P30,000. In the first year, it was used for 2080 hrs, in the second year, 3160 hrs. Find the second depreciation cost in pesos.

  • a. P23,520
  • b. P25,252
  • c. P39,500
  • d. P35,400

1204. An equipment costs P400,000 and has a life of 30,000 hrs at the end of which its salvage value is x pesos. In the first year, it was used for 6240 hrs. The book value at the end of the first year was P325,120. Find the value of x.

  • a. P40,629
  • b. P30,420
  • c. P40,000
  • d. P30,000

1205. An engineering firm from purchased, 12 years ago, a heavy planner for P50,000 with no salvage value. As the life of the planner was 20 years, a straight line depreciation reserve has been provided on that basis. Now the firm wishes to replace the old planner with a new one possessing several advantages. It can sell the old planner for P10,000. The new one will cost P100,000. How much new capital will be required to make the purchase?

  • a. P60,000
  • b. P55,000
  • c. P66,000
  • d. P57,000

1206. Ten years ago, a contractor was able to purchase a crane whose capacity is 2000 tons costing P125 per ton. The life was estimated to be 15 years with a salvage value of 10% of the cost. A market has been found for the old crane for P80,000. If the depreciation has been figured on a straight line basis what is the difference between the depreciation book value of the old crane and its sale value.

  • a. P10,000
  • b. P30,000
  • c. P15,000
  • d. P20,000

1207. What is the nominal value of interest compounded continuously for a period of 5 years of an equal payment series if the capital recovery factor is equal to 0.2385787.

  • a. 4% 
  • b. 5%
  • c. 6%
  • d. 8%

1208. What is the nominal rate of interest compounded continuously for a period of 5 years of an equal payment series if the sinking fund factor is equal 0.180519?

  • a. 4% 
  • b. 5%
  • c. 6%
  • d. 8%

1209. Compute the number of years so that the capital recovery factor of a uniform payment series be equal to 0.218638 if money is worth 3% compounded continuously.

  • a. 5
  • b. 4
  • c. 6
  • d. 3

1210. A manufacturing firm wishes to give each 80 employee a holiday bonus. How much is needed to invest monthly for a year at 12% nominal interest rate, compounded monthly, so that each employee will receive a P2000 bonus?

  • a. P12,608
  • b. P12,615
  • c. P12,600
  • d. P12,300

1211.) An instructor plans to retire in one year and want an account that will pay him P25000 a year for the next 15 years. Assuming 6% annual effective interest rate, what is the amount he would need to deposit now? (The fund will be depleted after 15 years)

  • a. P249,000
  • b. P242,806
  • c. P248,500
  • d. P250,400

1212. Ryan invest P5,000 at the end of each year in an account which gives a nominal annual interest of 7.5%, compounded continuously. Determine the total worth of his investment at the end of 15 years.

  • a. P133,545.58
  • b. P142,647.28
  • c. P126,336.42
  • d. P135,429.64

1213. A car dealer advertise the sale of a car model far a cash price of P280,000. If purchased in installment, the required down payment is 15% and balance payable in 18 equal monthly installments at an interest rate of 1.5% per month. How much will be the required monthly payments?

  • a. P15,185.78
  • b. P11,588.72
  • c. P10,972.33
  • d. P15,558.12

1214. How much must be deposited at 6% each year beginning Jan 1, year 1, in order to accumulate P5,000 on the date of the last deposit, Jan 1, year 6?

  • a. P751
  • b. P717
  • c. P715
  • d. P775

1215. In anticipation of a much bigger volume of business after 10 years, a fabrication company purchased an adjacent lot for its expansion program where it hopes to put up a building projected to cost P4,000,000 when it will be constructed 10 years after. To provide for the required capital expense, it plans to put up a sinking fund for the purpose. How much must the company deposit each year if the interest to be earned is computed at 15%

  • a. P197,008.25
  • b. P199,090.25
  • c. P177,009.25
  • d. P179,008.25

1216. Rainer Wandrew borrowed P50,000 from Social Security System, in the form of calamity loan, with interest at 8% quarterly installments for 10 years. Find the quarterly payments.

  • a. P1827.79
  • b. P1892.18
  • c. P1287.78
  • d. P1972.36

1217. For having been loyal, trustworthy, and efficient, the company has offered a superior yearly gratuity pay of P20,000 for 10 years with the first payment to be made one year after his retirement. The supervisor, instead, requested that he be paid a lump sum, on the date of his retirement, having less interest that the company would have earned if the gratuity is to be paid in yearly basis. If interest is 15%, what is the equivalent lump sum that he could get?

  • a. P100,375.37
  • b. P100,735.37
  • c. P101,757.37
  • d. P100,575.37

1218. If P500 is invested at the end of each year for 6 years, at an annual interest rate of 7%, what is the total peso amount available upon the deposit of the sixth payment?

  • a. P3,210
  • b. P3,577
  • c. P3,000
  • d. P4,260

1219. A series of year and payments extending over eight years are as follows: P10,000 for the first year, P20,000 for the second year, P50,000 for the third year, and P40,000 for each year from fourth year through the 8th year. Find the equivalent annual worth of these payments if the annual interest is 8%.

  • a. P44,800.00
  • b. P30,563.00
  • c. P35,650.00
  • d. P33,563.85

1220. In five years, P18,000 will be needed to pay for a building renovation,. In order to generate this sum, a sinking fund consisting of three annual payments is established now. For tax purposes, no further payments will be made after three years. What payments are necessary if money is worth 15% per annum?

  • a. P2870
  • b. P3919
  • c. P5100
  • d. P2670

1221. San Miguel Corporation purchases P400,00 worth of equipment in year 1970. It decided to use straight line depreciation over the expected 20 year life of the equipment. The interest rate is 16%. If the overall tax rate is 35% , what is the present worth of the tax shield?

  • a. P40,298.68
  • b. P41,501.89
  • c. P45,450.28
  • d. P51,410.37

1222. A local firm is establishing a sinking fund for the purpose of accumulating a sufficient capital to retire its outstanding bonds and maturity. The bonds are redeemable in 10 years, and their maturity value is P150,000. How much should be deposited each year if the fund pays interest at the rate of 3%?

  • a. P12,547.14
  • b. P13,084.58
  • c. P14,094.85
  • d. P16,848.87

1223. A machine costs P20,000 today and has an estimated scrap value of P2,000 after 8 years. Inflation is 2% per year. The effective annual interest rate earned on money invested is 8%. How much money needs to be set aside each year to replace the machine with an identical model 8 years from now?

  • a. P2,808.88
  • b. P3,290.00
  • c. P3,920.00
  • d. P3,610.00

1224. A machine is under consideration for investment. The cost of the machine is P25,000. Each year it operates, the machine generates P15,000. Given an effective annual interest rate of 18%, what is the discounted payback period, in years, on the investment of the machine?

  • a. 1.75 years
  • b. 3.17 years
  • c. 1.67 years
  • d. 2.16 years

1225. Company A purchases P200,000 of equipment in year zero. It decides to use straight line depreciation over the expected 20 year life of the equipment. The interest rate is 14%. If the average tax rate is 40%, what is the present worth of the depreciation tax held?

  • a. P30,500
  • b. P26,500
  • c. P39,700
  • d. P40,000

1226. Instead of paying P100,000 in annual rest for office space at the beginning of each year for the next 10 years, an engineering firm has decided to take out a 10 year P100,000 loan for a new building at 6% interest. The firm will invest P100,000 of the rent saved and earned 18% annual interest on that amount. What will be the difference between the revenue and expenses?

  • a. Firm will need P17,900 extra
  • b. Firm will break even
  • c. Firm will have P21,500 left over
  • d. Firm will need P13,000 extra

1227. A man inherited a regular endowment of P100,000 every end of 3 months for x years. However, he may choose to get a single lump of P3,702,939,80 at the end of 4 years. If the rate interest was 14% compounded quarterly, what is the value of x?

  • a. 13 years
  • b. 10 years
  • c. 12 years
  • d. 11 year

1228. A service car whose car price was P540,000 was bought with a down payment of P162,000 and monthly installments of P10,847.29 for 5 years. What was the rate of interest if compounded monthly?

  • a. 30%
  • b. 24%
  • c. 20%
  • d. 15%

1229. What is the present worth of a 3 year annuity paying P3000 at the end of each year, with interest at 8% compounded annually?

  • a. P7,731.29
  • b. P9,731.79
  • c. P7,371.29
  • d. P9,371.79

1230. A man paid a 10% down payment of P200,000 for a house and lot and agreed to pay the balance on monthly installments for 5 years at an interest rate of 15% compounded monthly. What was the monthly installment on pesos?

  • a. P44,528.34
  • b. P42,821.87
  • c. P43,625.92
  • d. P45,825.62

1231. A man inherited a regular endowment of P100,000 every end of 3 months for 10 years. However, he may choose to get a single lump sum payment at the end of 4 years. How much is this lump sum if the cost of money is 14% compounded quarterly?

  • a. P3,702,939.73
  • b. P3,802,862.23
  • c. P3,502,546.23
  • d. P3,602,431.73

1232. A man paid 10% down payment of P200,000 for a house and lot and agreed to pay the balance on monthly installments for x years at an interest rate of 15% compounded monthly. If the monthly installment was P42,821.87, find the value of x.

  • a. 5 years
  • b 9 years
  • c. 8years
  • d. 7 years

1233. A father wishes to provide P4000 for his son on his 21st birthday. How much should he deposit every 6 months in a savings bank which pays 3% compounded semi-annually if the first deposit is made when the son is 3.5 years old?

  • a. P45.76
  • b. P94.24 
  • c. P84.61
  • d. P78.68

1234. An employee obtained a loan of P100,000 at the rate of 6% compounded in order to build a house. How much must he pay monthly to amortize the loan within a period of 10 years?

  • a. P8,322.07
  • b. P1,101.80
  • c. P2,494.04
  • d. P3,452.90

1235. If money is worth 5% compounded semi-annually, find the present value of a sequence of 12 semi-annual payments of P500 each, the first of which is due at the end of 4.5 years.

  • a. P4,209.51
  • b. P5,602.62
  • c. P6,240.62
  • d. P7,161.42

1236. An annual deposit of P1270 is placed on the fund at the end of each year for 6 years. If the fund invested has a rate of interest of 5% compounded annually, how much is the worth of this fund at the end of 9 years?

  • a. P12,000
  • b. P10,000
  • c. P11,000
  • d. P14,000

1237. A fund for replacement of a machinery in a plant must have P30,000 at the end of 9 years. An equal deposit of P2,965 was made on the fund at the end of each 6 months for 4 years only. How much is the rate of the fund invested if it is compounded semi-annually?

  • a. 3.5%
  • b. 4.5%
  • c. 5.5%
  • d. P6.5%

1238. In purchasing a house, a man makes a cash payment and takes out a mortgage for P10,000 on which he agrees to pay P200 at the end of each month for 5 years. At what interest rate compounded monthly was interest charged on the mortgage?

  • a. 8.41%
  • b. 7.42%
  • c. 7.68%
  • d. 9.60%

1239. How much money must you invest in order to withdraw P2000 annually for 10 years if the interest rate is 9%?

  • a. P12,853.32
  • b. P12,881.37
  • c. P12,835.32
  • d. P12,385.32

1240. If interest is at rate of 8% compounded semi-annually, what sum must be invested at the end of each 6 months to accumulate a fund of P10,000 at the end of 8 years?

  • a. P458.20
  • b. P532.11
  • c. P498.23
  • d. P753.10

1241. A Corporation will invest P5000 in a fund at the end of each 6 months to accumulate P100,000 to initiate a plant overhaul. If the fund is invested at 6.5% compounded semi-annually, how may years will the fund contain at least P100,000?

  • a. 8 years
  • b. 6 years
  • c. 10 years
  • d. 9 years

1242. A piece of machinery can be bought for P10,000 cash, or for P2000 down and payments of P750 per year for 15 years. What is the annual interest rate for time payments?

  • a. 4.61%
  • b. 3.81%
  • c. 5.71%
  • d. 11.00%

1243. To accumulate a fund of P8000 at end of 10 years, a man will make equal annual deposit of P606.94 in the fund at the end of each year. How much is the rate of interest if it is compounded annually?

  • a. 6%
  • b. 8%
  • c. 10%
  • d. 12%

1244. A purchasing engineer of a certain firm is to purchase a second hand truck fro P75,000. A dealer offers cash payment of P5,000 and P6486 per month for 12 months. Another dealer offered under the same condition with 0.75% interest per month for 12 months of the unpaid balance. Which offer should the engineer choose and what is the rate of interest?

  • a. 0.62%
  • b. 1.66%
  • c. 0.75%
  • d. 0.40%

1245. If a low cost house and lot worth P87,000 were offered at 10% down payment and P500 per month for 25 years. What is the effective monthly interest rate on the diminished balance?

  • a. 0.492%
  • b. 0.687%
  • c. 0.531%
  • d. 0.683%

1246. A house and lot can be acquired with a down payment of P500,000 and a yearly payment P100,000 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 the money is worth 14% compounded semi-annually, what is the cash price of the property?

  • a. P810,000
  • b. P808,836
  • c. P801,900
  • d. P805,902

1247. A man bought a brand new car for P650,000 on installment basis at the rate of 10% per annum on the unpaid balance. If he paid a down payment of P120,000 cash and proposed to pay the balance in equal monthly payment for 2 years, what should be his monthly payment?

  • a. P54,323.03
  • b. P34,532.94
  • c. P24,447.03
  • d. P83,534.32

1248. A businessman is faced with the prospect of fluctuating future budget for the maintenance of the generator. During the first 5 years, P1,000 per year will be budgeted. During the second 5 years, the annual budget will be P1500 per year. In addition, P3500 will be budgeted for an overhaul of the machine at the end of the fourth year and another P3500 for an overhaul at the end of 8th year. Assuming compounded interest at 6% per annum, what is the equivalent annual cost of maintenance?

  • a. P1,888.87
  • b. P1,738.34
  • c. P1,777.38
  • d. P1,999.34

1249. A parent on the day the child is born wishes to have to determine what lump sum would have to be paid into an account bearing interest at 5% compounded annually, in order to withdraw P20,000 each on the child’s 18th, 19th, 20th, and 21st birthdays.

  • a. P35,941.73
  • b. P33,941.73
  • c. P30,941.73
  • d. P25,941.73

1250. If money is worth 5% compounded semi-annually, find the present value of a sequence of 12 semi-annual payments of P500 each, the first of which is due at the end of 4.5 years.

  • a. P4,209.51
  • b. P5,038.29
  • c. P3,958.48
  • d. P4,936.39

Complete List of MCQs in General Engineering and Applied Science per topic

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