Name: ______________________________________________ S.

N:
_____________________
Professor: ____________________________________________ Date:
____________________

1. A company puts P25 000.00 and will pay P5000.00 every year for the life of a machine for 10
years. If the salvage value is zero and the interest rate is 10% compounded annually, what is the
present value of the machine? (Ans: P55 723.00)

2. An electric generator is purchased for P80 000.00, it is expected to be used for five years, and
then sold for P15 000.00. Annual operating and maintenance costs are estimated at P20 000.00.
Using a discount rate of 10%, determine the present worth of the investment. (Ans: P146 502.00)
3. To maintain its newly acquired equipment, the company needs P40 000.00 per year for the first
five years and P60 000.00 per year for the next five years. In addition, an amount of P140 000.00
would also be needed at the end of the fifth and the eighth years. At 6% interest, what is the
present worth of these costs? (Ans: P549 812.00)

4. An investment of P135 000.00 is being considered for a new lathe machine. Estimated
economic life of the lathe is 12 years with a salvage value of P10 000.00. Projected annual income
and expenses for the investment are P80 000.00 and P30 000.00, respectively. Using an MARR
of 15% compounded annually and applying PW analysis, determine if the lathe should be
purchased. (Ans: Purchase is justified, P137 900.00)

5. A mining company is offered a 9-year lease for a coal mine at a cost of P120M. The engineers
estimate the company will be able to mine 15 000 tons/yr for the first four years and 22 500 tons/yr
for the next five years. Operating cost is computed at P1250/ton, while the price of coal is
P2750/ton. If the company requires a 12% minimum rate of return on its investment, determine if
the offer should be considered. Apply PW Analysis. (Ans: offer should be accepted, P25.66M)
6. J. Timberlake Corporation needs a special manufacturing machine for its production plant. The
company may purchase the machine for P500 000.00 and have it installed at a cost of P50 000.00.
The machine will incur an annual cos of P35 000.00 for maintenance and repair, and is expected
to be used for eight years and then sold for P50 000.00. The company may also rent the machine
at P115 000.00 per year payable at the end of each year. If the machine is rented, costs of
installation and repair should be shouldered by the lessor, however, a fee of P20 000.00 per year
payable at the end of each year will be charged for basic maintenance. If the company requires
an 11% MARR on its investments, determine the better alternative using PW analysis. (Ans: It is
advantageous to rent, -P694 726.57; -P708 417.97)

7. Same as problem number 6 except that the lease requires that rental payment be given in
advance (at the start of each year). (Ans: It will be advantageous to purchase, - P708 417.97; -
P759 825.00)
8. Two 30-hp pumps are being considered for use in a manufacturing plant. Pump A has an
efficiency of 85% costs P220 000.00, has a life of 15 years, and a salvage value of P40 000.00.
Pump B has an efficiency of 78%, costs P130 000.00, has a life of 15 years, with no salvage
value. Power charge is P9/kW-hr and the pump will be operated eight hours a day, 270 days per
year. Annual insurance and tax charges are 5%. Determine the pump to be purchased, using PW
Analysis and a 14% rate of return. (Ans: Purchase Pump A, P3425 790.35 < P3595 893.09)

9. Two processes are being considered for the production of a machine part. Process 1 requires
an equipment cost of P180 000.00, a yearly operating cost of P90 000.00, and has zero salvage
value of at the end of its 6-year life. Process 2 has corresponding figures of P320 000.00, P72
000.00, P45 000.00 and a 9-year life. If the applied MARR is 20%, compare the two processes
using PW analysis. (Ans: PT1 =- P693 567.36; PT2 = -P718 084.62)
10. CLC Publishing is considering the purchase of an offset printing machine. A study of three
available alternatives shows the following estimates:
A B C
Acquisition Cost P700 000.00 P850 000.00 P1000 000.00
Shipping Cost 5% 5% 8%
Net Annual Benefit P155 000.00 P145 000.00 P170 000.00
Useful Life 8 years 16 years 16 years
Salvage Value P35 000.00 P70 000.00 P80 000.00
If at the end of eight years alternative A could be replaced with a identical machine having the
same cost and benefits, determine the alternative to be selected using present worth analysis and
a 14% MARR. (Ans: PTA = -P5005.80; PTB = -P24 536.06; PTC = -P5108.53; select alternative
B)
11. To increase production, an engineer is considering the purchase of new machine. The
machine costs P350 000.00 and will have a salvage value of P10 000.00 at the end of eight years.
Operating and maintenance cost is expected to be P4000.00 per year. With this machine. Annual
revenue is expected to increase by P85 000.00. Using future worth analysis and a 15% rate of
return, determine if the purchase should be recommended. (Ans: F1 = P51 214.34; recommend
the purchase)

12. You purchased a warehouse eight years ago for P3.5M. Since then you had rented it out for
P240 000.00 per year, incurring P55 000.00 per year for repairs and maintenance. Five years ago
you spent P250 000.00 for roof replacement and you increased the annual rent to P300 000.00
and the succeeding year. If you decide to sell the warehouse for P5.4M to a willing buyer now,
evaluate your investment using future worth analysis and a 12.5% rate of return. (Ans: - P1328
417.25)
13. Using future worth analysis and an MARR of 10%, find the future worth of an investment
opportunity with estimated receipts and disbursements shown below: (Ans: P29 585.20)
End of Year Receipts Disbursements
0 0 P500 000.00
1 P50 000.00 100 000.00
2 150 000.00 120 000.00
3 240 000.00 25 000.00
4 200 000.00 25 000.00
5 150 000.00 0
6 150 000.00 0
7 150 000.00 0
14. You have a choice to borrow P5000.00 from a friend or from a bank. The bank charges 20%
per year, while your friend charges 1.6% per month. If the loan is payable in one year, where will
you borrow to get the best deal and why? (Ans: From the bank, I will save P49.00)

15. Two machines A and B are being considered for use in a small manufacturing plat. Machine
A has a first cost of P125 000.00, and an estimated life of seven years and a salvage value of
P12 500.00. Annual operations and maintenance cost is estimated to be P10 000.00. The
corresponding figures of machine B are P175 000.00, seven years, P25 000.00, and P8500.00.
Using future worth analysis and an interest rate of 14%, specify which machine should be
preferred. (Ans: Select Machine A, - P407.588.51)
16. Two types of metal sheets can be used in the manufacture of container vans that require 20
m2 of material. Steel sheets which cost P500.00/m2 may be used but will have to be painted at a
cost of P200.00/m2, with repainting done every 4 years. Aluminum which costs P1000.00/m2 and
is guaranteed to last for 16 years may also be used. If the aluminum is used the vans may be sold
at P10 000.00 higher than the steel vans at any time. If steel is used repainting has to be done
before the vans are sold. If the vans are to be sold after 8 years, determine the material to be
used using FW analysis and a 15% MARR. (ANS: Use aluminum, FTA = - P51 180.46)

17. If the vans in Prob 16 are to be sold after 16 years with all other data remaining the same,
determine the material to be used. (ANS: Use steel, FTS = - P175 539.81)

18. An engineer has a current balance of P110 000.00 in his savings account. The bank will be
giving 6% interest compounded semi-annually for the next two years and 8% interest
compounded semi-annually thereafter. A large corporation is offering P10 000.00, 8% bonds that
pays interest every six months for P11 000.00. If the maturity is five years, should he withdraw
and purchase the bonds, or should he leave his savings in the bank? Use future worth analysis.
(Ans: Money should be left in the banks=; P156 654.05; P143 266.41)
CE Board Exam May 2006
19. Determine the annual cost of a structure that requires P15M to build with a salvage value of
P2M after 12 years, if interest is 6% (Ans. - P1670 601.00)

20. A generator costs P80 000.00 has an annual maintenance cost of P9000,00, a 12 year useful
life, and a salvage value of P5000 00. interest is b determine the annual cost of the generator.
(Ans. - P19 352.13)
21. EE Board Exam October 2004
To maintain a machine with a 15 year life, the following outlays are needed: P3000.00 at the end
of the 5 year. P 4500.00 at the end of the gh year, and P 4000.00 at the end of the 12 year. If the
money is worth 7% compounded annually determine the equivalent uniform maintenance cost of
the structure for the 15 year period (Ans-P698.60)

22. EE Board Exam October 2005

To maintain a structure with a life of 20 years it is necessary to provide the following for repairs:
P 20 000.00 at the end of 5 year
P 30 000.00 at the end of 10 year
P 40 000.00 at the end of 15 year
If money is worth 10% compounded annually, determine the equivalent uniform annual
maintenance cost for the 20 year period? (Ans. - P3942.00)
23. Using an MARR of 15%, determine the annual worth of a packaging equipment having an
initial cost of P830 000, a 10 year life and a salvage value of P140 000.00. A net revenue of P250
000.00 per year is expected from this equipment. (Ans P91 516 08)

24. Find the annual cost of machine having a first cost of P320 000,00 a lo of five years and a
salvage value of P25 000.00, operating cost of machine is P15 000.00 10% per year, with end-
of-year taxes amounting to 3% of first cost. Use an interest rate of 10%. (Ans. - P104 92026)
25. Big Bro manufacturing company purchased a delivery van having a cost of P900 000.00, a
life of eight years and a salvage value of P75 000. Estimated maintenance cost is P20 000.00 per
year with a major overhaul costing P80 000 required at the end of four years. Using a 14% MARR,
find the annual cost of the van? (Ans. - P218 556.05)

26. An investor is considering the development of a recreational complex with the following
relevant data: initial cost is P54M, estimated life is 15 years, salvage value is P2.5M, yearly costs
for operations and maintenance is P3.5M, annual property tax is 4% of first cost, insurance
premium (payable at the start of the year) is 2% of first cost, expected yearly revenue is P15M. If
the investor applies a 10% MARR, determine the annual worth of this venture.
(Ans. P1131 100.49)
27. Two contractors submitted the following cost estimates for a proposed 100-m bridge.
Bridge A Bridge B
First Cost P20M P27M
Life 20 years 30-years
Salvage Value P500 000.00 P750 000.00
Annual Upkeep P160 000.00 P50
000.00
Repairs P1.5M/4 years P1M/6
years
If interest is 7.5% compounded annually, determine the capitalized cost for each bridge. (Ans.
CCA= P32 608 653; CCB= P32 892 197.74)
CE Board Exam May 2004
28. A shoes factory has a production capacity of 9000 units per month. The fixed and variable
cost are as follows:
Fixed Monthly operating cost= P900 000.00
Material and labor cost=P200.00 per unit
Selling price per unit= P500.00
What is the profit per month if the factory has an efficiency of 80%? (Ans. P1 260
000.00)

EE Board Exam October 1998

29. The annual maintenance cost of a machine shop is P69 994.00. If the cost of making a forging
is P56.00 per unit and the selling price is P135.00 per forged unit, find the number of units to be
forged to break-even. (Ans. 886 units)
CE Board Exam May 1998, May 1999
30. Determine the break-even point in terms of number of units produced per month using the
following data: (cost are in peso per unit)
Selling price per unit ……………………………………………………………..P
600.00
Total monthly overhead expenses ………………………………….P 428 000.00
Labor cost ……………………………………………………………………………..P
115.00
Cost of Materials
…………………………………………………………………..…P76.00
Other Variable Cost
……………………………………………………………………P2.32
(Ans. 1053 units)

31. Elektra Industries manufactures AVRs at a labor cost of P85.00/unit, material cost of
P350.00/unit, with other variable costs at P20.00/unit. The fixed charges on the business are
P125 000.00/month. If the AVRs are sold to retailers for P850.00/unit, how many units must be
produced each year to break-even? (Ans. 317 units)
32. JFrost Corporation has the capacity to produce 1200 air-conditioners a month. The fixed cost
of production is P4.5M per month, material cost is P1 500.00/unit and labor cost is P1 000.00/unit.
If the selling price for each air-conditioner is P10 000.00, determine a.) the profit or loss made for
a production of 70% capacity; b.) the break-even point each month if the fixed cost is reduced by
10% and the labor cost is reduced by 20%. (Ans. P1.8M; 526 units)

33. A factory engaged in the manufacture of compact disk has a production capacity of P1.5M
disks per year. Due to lack of investors, it is at present operating at 55% capacity. The annual
sales is P8.25M, annual fixed cost P6.9M, and variable cost is P2.00/pc. Determine a.) the current
profit or loss; b.) the break-even point. (Ans. –P300
000.00/year; 862 500 disks/year)
34. Four years ago, an investor purchased a five door apartment for P5.5M. Income from rent
exceeded maintenance and insurance cost by P480, 000.00 per year. If the property is now sold
for P7.55M with an 8.25% income tax charged from capital gain, determine the after tax rate of
return realized on the investment. (Ans. 14%)

35. A 10-year copper mine lease requires P27.1M. The estimated annual net income of the mine
is P6M for the first 5 years and P4M for the last five years. If an investor requires a 12% MARR,
determine the acceptability of the project based on the IRR. (Ans.
Project is acceptable, 14.66%)
36. For its 3-year fabrication contract, Deception Industries is considering the use of robot 1 of
problem no 30, using ROR analysis and a 25% MARR, determine the suitability of the robot. (Ans.
Robot 1 is acceptable, 29.93%)

37. Optimum Properties Corp. is considering the construction of a 50-unit condominium near the
university belt area. The 15-year investment study shows the following data:
Disbursements Revenue
Land P8 000 000.00 Land after 15 years P43
000 000.00
Building P25 000 000.00 Bldg. after 15 years P8
600 000.00
Maintenance/year P300 000.00 Rent/unit-yr
P120 000.00
Insurance and Realty Tax/year 12%
With an estimated occupancy rate of 92% at all times, determine the acceptability of the venture
using IRR. The company applies a 15% MARR on its investments. (Ans. Project is
acceptable, 15.7%)