# MCQs in Engineering Economics Part XXI

Compiled MCQs in Engineering Economics Part 21 of the series as one topic in General Engineering and Applied Sciences (GEAS) in the ECE Board Exam.

This is the Multiples Choice Questions Part 21 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 21: MCQs from Number 1001 – 1050                 Answer key: PART XXI

### Continue Practice Exam Test Questions Part XXI of the Series

Choose the letter of the best answer in each questions.

1001. A person buys a piece of lot for P100,00 down payment and 10 deferred semi-annual payments of P8,000 each, starting three years from now. What is the present value of the investment if the rate of interest is 12% compounded semi-annually?

• A. P134,666.80
• B. P143,999.08
• C. P154,696.80
• D. P164,969.80

1002. A man loans P187,400 from a bank with interest at 5% compounded annually. He agrees to pay his obligations by paying 8 equal annual payments, the first being due at the end of 10 years. Find the annual payments.

• A. P44,982.04
• B. P56,143.03
• C. P62, 334.62
• D. P38,236.04

1003. A housewife bought a brand new washing machine costing P12,000 if paid in cash. However, she can purchase it on 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. P2,782.85
• B. P2,872.58
• C. P2,400.00
• D. P2,827.58

1004. Mr. Ayala borrows P100,000 at 10% effective annual interest. He must pay back the loan over 30 years with uniform monthly payments due on the first day of each month. What does Mr. Ayala pay each month?

• A. P870.00
• B. P846.00
• C. P878.00
• D. P839.00

1005. A house and lot can be acquired by a down payment of P500,000 and a yearly payment of 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 money is worth 14% compounded annually, what is the cash price of the property?

• A. P810,100
• B. P808,811
• C. P801,900
• D. P805,902

1006. A piece of machinery can be bought for P10,000 cash or for P2,000 down and payments of P750 per year for 15 years. What is the annual interest rate for the time payments?

• A. 4.61%
• B. 3.81%
• C. 5.71%
• D. 11.0%

1007. 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. P3,802,862
• B. P3,702,939
• C. P3,502,546
• D. P3,602,431

1008. A parent on the day the child is born wishes 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. How much is the lump sum amount?

• A. P35,941.73
• B. P33,941.73
• C. P30,941.73
• D. P25,941.73

1009. An instructor plans to retire in exactly one year and want an account that will pay him P25,000 a year for the next 15 years. Assuming a 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

1010. An investment of P350,000 is made to be followed by payments of P200,000 each year for 3 years. What is the annual rate of return on investment for the project?

• A. 41.7%
• B. 32.7%
• C. 51.1%
• D. 15%

1011. A small machine has an initial cost of P20,000, a salvage value of P2,000 and a life of 10 years. If your cost of operation per year is P3,500 and your revenues per year is P9,000, what is the approximate rate of return on the investment?

• A. 25.0%
• B. 22.5%
• C. 23.9%
• D. 24.8%

1012. 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. 11
• B. 9
• C. 5
• D. 7

1013. A manufacturing firm wishes to give each 80 employees a holiday bonus. How much is need to invest monthly for a year at 12% nominal interest rate compounded monthly, so that each employee will receive a P2,000 bonus?

• A. P12,608
• B. P12,610
• C. P12,600
• D. P12,300

1014. Find the present value in pesos, of a perpetuity of P15,000 payable semi-annually if money is worth 8% compounded quarterly.

• A. P372,537
• B. P374,977
• C. P373,767
• D. P371,287

1015. A fund donated by a wealthy person to IIEE to provide annual scholarships to deserving EE students. The fund will grant P5,000 for each of the first five years, P8,000 for the next 5 years and P10,000 for each year thereafter. The scholarship will start one year after the fund is established, if the fund earns 8% interest, what is the amount of the donation?

• A. P101,605.71
• B. P101,505.21
• C. P100,506.21
• D. P 99,601.71

1016. A company issued 50 bonds of P1,000.00 face value each, redeemable at par at the end of 15 years to accumulate the funds required for redemption. The firm established a sinking fund consisting of annual deposits, the interest rate of the fund being 4%. What was the principal in the fund at the end of the 12th year?

• A. P35,983.00
• B. P38,378.00
• C. P41,453.00
• D. P37,519.00

1017. A unit of welding machine cost P45,000 with an estimated life of 5 years. Its salvage value is P2,500. Find its depreciation rate by straight-line method.

• A. 17.75%
• B. 19.88%
• C. 18.89%
• D. 15.56%

1018. A machine has an initial cost of P50,000 and a salvage value of P10,000 after 10 years. Find the book value after 5 years using straight-line method.

• A. P12,500
• B. P30,000
• C. P16,400
• D. P22,300

1019. The initial cost of a paint sand mill, including its installation, is P800,000. The BIR approved life of this machine is 10 years for depreciation. The estimated salvage value of the mill is P50,000 and the cost of dismantling is estimated to be P15,000. Using straight-line depreciation, what is the annual depreciation charge and what is the book value of the machine at the end of six years?

• A. P74,500; P340,250
• B. P76,500; P341,000
• C. P76,500; P342,500
• D. P77,500; P343,250

1020. The cost of equipment is P500,000 and the cost of installation is P30,000. If the salvage value is 10% of the cost of equipment at the end of 5 years, determine the book value at the end of the fourth year. Use straight-line method.

• A. P155,000
• B. P140,000
• C. P146,000
• D. P132,600

1021. An asset is purchased for P500,000.00. The salvage value in 25 years is P100,000.00. What is the total depreciation in the first three years using straight-line method?

• A. P48,000
• B. P24,000
• C. P32,000
• D. P16,000

1022. A machine has an initial cost of P50,000 and a salvage value of P10,000.00 after 10 years. What is the block value after 5 years using straight line depreciation?

• A. P35,000.00
• B. P25,000.00
• C. P15,500.00
• D. P30,000.00

1023. An equipment costs P10,000 with a salvage value of P500 at the end of 10 years. Calculate the annual depreciation cost by sinking fund method at 4% interest.

• A. P791.26
• B. P950.00
• C. P971.12
• D. P845.32

1024. A machine costing P720,000 is estimated to have a book value of P40,545.73 when retired at the end of 10 years. Depreciation cost is computed using a constant percentage of the declining book value. What is the annual rate of depreciation in %?

• A. 28
• B. 25
• C. 16
• D. 30

1025. A machine costing P45,000 is estimated to have a book value of P4,350 when retired at the end of 6 years. Depreciation cost is computed using a constant percentage of declining book value. What is the annual rate of depreciation in %?

• A. 33.25
• B. 32.25
• C. 35.25
• D. 34.25

1026. ABC Corporation makes it a policy that for any new equipment purchased, the annual depreciation cost should not exceed 20% of the first cost at any time with no salvage value. Determine the length of service life necessary if the depreciation used is the SYD method.

• A. 9 years
• B. 10 years
• C. 12 years
• D. 19 years

1027. A company purchases an asset for P10,000.00 and plans to keep it for 20 years. If the salvage value is zero at the end of 20th year, what is the depreciation in the third year? Use SYD method.

• A. P1,000
• B. P857
• C. P937
• D. P747

1028. A telephone company purchased a microwave radio equipment for P6 million, freight and installation charges amounted to 4% of the purchased price. If the equipment will be depreciated over a period of 10 years with a salvage value of 8%, determine the depreciation cost during the 5th year using SYD.

• A. P626,269.10
• B. P622,786.07
• C. P638,272.08
• D. P627,989.90

1029. An asset is purchased for P9,000.00. Its estimated life is 10 years after which it will be sold for P1,000.00. Find the book value during the first year if sum-of-years digit(SYD) depreciation is used.

• A. P8,000
• B. P6,500
• C. P7,545
• D. P6,000

1030. The maintenance cost for a sewing machine this year is expected to be P500. The cost will increase P50 each year for the subsequent 9 years. The interest is 8% compounded annually. What is the approximate present worth of maintenance for the machine over the full 10-year period?

• A. P4,700
• B. P5,300
• C. P4,300
• D. P5,500

1031. At 6%, find the capitalized cost of a bridge whose cost is P250M and life is 20 years, if the bridge must be partially rebuilt at a cost of P100M at the end of each 20years.

• A. P275.3M
• B. P265.5M
• C. P295.3M
• D. P282.1M

1032. A corporation uses a type of motor truck which costs P5,000 with life of 2 years and final salvage value of P800. How much could the corporation afford to pay for another type of truck of the same purpose whose life is 3 years with a final salvage value of P1,000. Money is worth 4%.

• A. P8,450.66
• B. P7,164.37
• C. P6,398.24
• D. P9,034.56

1033. 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 P20,000, the salvage value of the equipment after three years is P8,0000. The company’s rate of return on the money is 10%. Determine the capital recovery rate per year.

• A. P5,115
• B. P4,946
• C. P5,625
• D. P4,805

1034.The annual maintenance cost of a machine shop is P69,994. If the cost of making a forging is P56 per unit and its selling price is P135 per forged unit, find the number of units to be forged to break-even.

• A. 886 units
• B. 885 units
• C. 688 units
• D. 668 units

1035. A manufacturer produces certain items at a labor cost of P115 each, material cost of P76 each and a variable cost of P2.32 each. If the item has a unit price of P600, how many number of units must be manufactured each month for the manufacturer to break even if the monthly overhead is P428,000?

• A. 1053
• B. 1138
• C. 946
• D. 1232

1036. Steel drum manufacturer incurs a yearly fixed operating cost of \$200,000. Each drum manufactured cost \$160 to produce and sells \$200. What is the manufacturer’s break-even sales volume in drums per year?

• A.1250
• B. 2500
• C. 5000
• D. 1000

1037. JRT Industries manufactures automatic voltage regulator at a labor cost of P85.00 per unit and material cost of P350.00 per unit. The fixed charges on the business are P15,000 per month and the variable costs are P20.00 per unit. If the automatic voltage regulators are sold to retailers at P580.00 each, how many units must be produced and sold per month to breakeven?

• A. 104
• B. 200
• C. 120
• D. 150

1038. Compute for the number of locks that an ice plant must be able to sell per month to break even based on the following data:

Cost of electricity per block – P20.00

Tax to be paid per block – P2.00

Real estate Tax – P3,500.00 per month

Salaries and Wages – P25,000.00 per month

Others – P12,000.00 per month

Selling price of ice – P55.00 per block

• A.1228
• B. 1285
• C. 1373
• D. 1312

1039. The annual maintenance cost of a machine is P70,000. If the cost of making a forging is P56 and its selling price is P125 per forged unit. Find the number of units to be forged to break even.

• A. 1015 units
• B. 985 units
• C. 1100 units
• D. 1000 units

1040. XYZ Corporation manufactures bookcases that sell for P65.00 each. It costs XYZ Corporation P35,000 per year to operate its plant. This sum includes rent, depreciation charges on equipment, and salary payments. If the cost to produce one bookcase is P50.00, how many cases must be sold each year for XYZ to avoid taking a loss?

• A. 2334
• B. 539
• C. 750
• D. 2333

1041. A company which manufactures electric motors has a production capacity of 200 motors a month. The variable costs are P150.00 per motor. The average selling price of the motors is P275.00. Fixed costs of the company amount to P20,000 per month which includes taxes. The number of motors that must be sold each month to break even is closest to:

• A. 40
• B. 150
• C. 80
• D. 160

1042. A price tag of P1200 is specified if paid within 60 days but offers 3% discount for cash in 30 days. Find the rate of interest.

• a. 37.11%
• b. 38.51 %
• c. 40.21 %
• d. 39.31 %

1043. Mr. Almagro made a money market of P1 000 000 for 30 days at 7.5% per year. If the withholding tax is 20%, what is the net interest that he will receive at the end of the month?

• a. P3 000
• b. P4 000
• c. P6 000
• d. P5 000

1044. A deposit of P110 000 was made for 31 days. The net interest after deducting 20% withholding tax is P890.36. Find the rate of return annually.

• a. 12.25
• b. 11.75
• c. 12.75
• d. 11.95

1045. A nominal interest of 3% compounded continuously is given on the account. What is the accumulated amount of P10 000 after 10 years?

• a. P13 610.10
• b. P13 500.10
• c. P13 498.60
• d. P13 439.16

1046. A man expects to receive P25 000 in 8 years. How much is that worth now considering interest at 8% compounded quarterly?

• a. P13 859.12
• b. P13 958.33
• c. P13 675.23
• d. P13 265.83

1047. P200 000 was deposited for a period of 4 years and 6 months and bears on interest of P85 649.25. What is the rate of interest if it is compounded quarterly?

• a. 8%
• b. 7%
• c. 6%
• d. 5%

1048. Find the time required fro a sum of money to triple itself at 5% per annum compounded continuously?

• a. 18.23 yrs.
• b. 21.97 yrs.
• c. 23.36 yrs.
• d. 25.34 yrs.

1049. If the nominal interest is 12% compounded continuously, compute the effective rate of annual interest.

• a. 12.40%
• b. 11.26%
• c. 12.75%
• d. 11.55%

1050. If a sum of money triples in a certain period of time at a given rate of interest, compute the value of the single payment present worth factor.

• a. 0.292
• b. 0.333
• c. 1.962
• d. 3

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