Econ

9. A construction company borrows P500,000 for 5 years at 12%.
At the end of 5
years, it renews the loan for the amount due plus P200,000 more for 2 years at
14%. What is the lump sum due?
10. A bank charges 12% simple interest on P300.00 loan. How much will be repaid
if the load is paid back in one lump sum after 3 years?
11. A person borrows P5000 at an interest rate of 18% compounded monthly. Monthly 12. A sinking fund consists of 15 annual deposits of P2000 each, with interest
payments of P167.10 are agreed upon. The length of the loan is closest to earned at a rate of 12% compounded annually. What is the principal in the fund at
its terminal date?
13. If P2000 is invested at the end of each year for 5 years, at an effective 14. The sum of P5000 is deposited in a sinking fund at the end of each year for 4
annual interest rate of 12%, what is the total amount available upon deposit of years. If the interest rate is 12% compounded annually, what is the principal in
the fifth payment? the find at the end of the 4th year?
15. A house and lot can be acquired at a down payment of P500,000 and a yearly 16. How much must be deposited at 6% each year beginning on January 1, year 1, in
payment of P100,000 at the of each year for a period of 10 years, starting at the order to accumulate P5000 on the date of the last deposit, January 1, year 6?
end of 5 years from the date of purchase. If money is worth 14% compounded
annually, what is the cash price of the property?
17. A piece of machinery can be bought for P10,000 cash, or for P2000 down and 18. An instructor plans to retire in exactly one year and want an account that
payments of P750 per year for 15 years. What is the annual interest rate for the will pay him P25,000 a year for the next 15 years. Assuming a 6% annual effective
time payments? interest rate, what is the amount he would need to deposit now? (The fund will be
depleted after 15 years)
19. A manufacturing firm wishes to give each 80 employees a holiday bonus. How 20. A merchant puts in his P2000 to a small business for a period of 6 years.
much is needed to invest monthly per year at 12% nominal interest rate, With a given interest rate on the investment of 15% per year, compounded
compounded monthly, so that each employee will receive P2000 bonus? annually, how much will he collect at the end of the 6th year?
21. A couple is planning to finance their 5 year old daughter’s college 22. How much do you need to invest in equal annual amounts for the next 10 years
education. They established a college fund that earns 10% compounded annually. if you want to withdraw P5000 at the end of the 11th year and increase the annual
What annual deposit must be made from the daughter’s 5th birthday now to her 16 th withdrawal by P1000 each year thereafter until year 25? The interest rate is 6%
birthday to meet the future college expenses shown in the following table. Assume compounded annually.
that today is her 5th birthday.
23. Your R&D group has developed and tested computer software that assists 24. What is the capitalized equivalent amount at 10% of annual interest for a
engineers in controlling a proper chemical mix for the tire manufacturing series of annual receipts of P400 for the 1st 10 years, which will increase to
industry. If you decide to market the software, your first year operating net P500 per year after 10 years and remains constant thereafter?
cash flow is estimated to be P1,000,000. Because of the market completion, your
product life will be about 4 years and its market share will decrease by 25% each
year over the previous years. You have been approached by a big software house
who wants to purchase the right to manufacture and distribute the product.
Assuming that your interest rate is 15%, for what minimum price would you be
willing to sell the software?
25. If the nominal interest is 3%, how much is P5,000 worth in 10 months in a 26. A person needs P120,000 immediately as a down payment on a new home. Suppose
continuously compounded account? that she can borrow this money from her company credit union. She will be
required to repay the loan in equal payments made every six months over the next
12 years. The annual interest rate being charged is i10% compounded continuously.
What is the amount of each payment?
27. For how many years must an investment of P63,000 provide a continuous flow of 28. How much can be paid for a P50,000, 10% bond, with interest paid
funds at the rate P16,000 per year so that a nominal interest rate of 10%, semiannually, if the bond matures 12 years hence? Assume that the purchaser will
continuously compounded, will be earned? be satisfied with 8% nominal interest compounded semiannually?
29-31
A rice mill installed a new machinery costing P240,000 and with an estimated 31. Declining balance method
salvage value of P20,000 at the end of its useful life of 10 years. Determine its
book value at the end of 5 years using
29. Straight line method
30. Sinking fund method with an annual interest of 12%

32-33 33. Percentage depletion method
A gold mine is expected to produce 30,000 ounces of gold is purchased for

P2,400,000. The gold can be sold for P450 per ounce; however, it costs P265 per
ounce for mining and processing costs. If 3,500 ounces are produced this year and
for gold the depletion allowance as a percentage of gross sales is 15%, the
depletion allowance using the following is
32. Unit depletion method

34. A company wishes to purchase manufacturing equipment to produce a product for 35. Determine the payback period to the nearest year for the following project:
the forseeable future. 4 alternative investments are being considered. All four
investments are for the same type of unit and yield the same quantity and quality
product. Given a discount rate (interest rate) of 12%, which is the most
economical option?
36. a city government is considering increasing the capacity of the current waste 37. A manufacturing company is considering 2 types of industrial projects which
water treatment plant. The estimated financial data for the project is as require the same level of initial investment but provide different levels of
follows. operating cash flows over the project life. The in house engineer has compiled
the ff financial data related to both projects, including the IRR figures. The
What would be the net benefit cost ratio for this expansion project? company has been using the IRR as a justification tool, and these projects will
be evaluated based on the principle of rate of return. The firms minimum rate of
return is 12%. Which project should you select?
38. Consider the two mutually exlusive service projects with individual lives of 39. Two options are available for painting your house: (1) oil based painting
3 years and 2 years, respectively. (Mutually exclusive service projects will have which costs P5,000 and (2) water-based painting which costs P3,000. The estimated
identical revenue for each year of service). The interest rate is known to be 6%. lives are 10 years and 5 years respectively. For either option, there is no
If the required service period is indefinite (infinite), and both projects can be salvage value at the end of respective service life. Assume that you will keep
repeated with the given costs, which project is the better choice? and maintain the house for 10 years. If your personal interest rate is 10% per
year, which of the following statements is correct?
40. A drill press machine can be purchased at P100,000 and is expected to have a 41. Consider the following two mutually exclusive projects. At the interest rate
constant salvage value of P20,000 regardless of its age. The operating cost for of 12%, what do you recommend?
the 1st year is expected to be P40,000, and it will then increase P20,000 per
year, as a result of degrading efficiency. If the interest rate is 10%, determine
the economic service life of the drill press machine. (Assume that all cost
figures and salvage value are given on an after tax basis.)
42. Compute for the number of pallets that a plastic plant must be able to sell 43. XYZ Corporation manufactures bookcases that it sells for P65.00 each. It
per month to breakeven based on the following data: costs XYZ P35,000,000 per year to operate its plant. This sum includes rent,
depreciation charges on equipment, and salary payments. If the costs to produce
one bookcase is P50.00, how many cases must be sold each year for XYZ to avoid
taking a loss?
44. Two 150-hp motors are being considered for installation at a municipal sewage 45. A company which manufactures electric motors has a production capacity of 200
treatment plant. The first motor costs P4,500 and has an operating efficiency of motors a month. The variable costs are P150 per motor. The average selling price
83% at full load. The second motor costs P3,600 and has an efficiency 80% at full of the motors is P275. Fixed costs of the company amount to P20,000 per month
load. The annual operating and maintenance cost (excepting power cost) amounts to which includes taxes. The number of motors that must be sold each month to
15% of the original cost of each motor. The power costs are a flat 5 cents per breakeven is closest to:
kW-h. The minimum number of hours of full load operation per year necessary to
justify the purchase of the more expensive motor i=6% falls in which one of the
following ranges?

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9. A construction company borrows P500,000 for 5 years at 12%.

29. Straight line method

30. Sinking fund method with an annual interest of 12%

A gold mine is expected to produce 30,000 ounces of gold is purchased for

32. Unit depletion method

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