# Engineering Economy

**Problem**

A contractor can buy a dump trucks for P800,000 each (surplus) or rent them for P1,189 per truck per day. The truck has salvage value of P100,000 at the end of its useful life of 5 years. Annual cost of maintenance is P20,000. If money is worth 14% per annum, determine the number of days per year that a truck must be used to warrant the purchase of the truck.

A. 200 | C. 198 |

B. 199 | D. 197 |

**Situation**

An investment of P250,000 is made at the end of each year with interest of 2.5% compounded annually.

- Determine the equal-payment-series compound-amount factor after 10 years.
A. 11.203 C. 9.632 B. 10.578 D. 8.736 - Determine the total amount of the investment after 10 years.
A. P2,800,000.00 C. P2,400,000.00 B. P2,600,000.00 D. P2,200,000.00 - How long (in years) will it take for the investment to amount to P10,000,000.00?
A. 25 C. 15 B. 18 D. 28

**Problem**

\$180,000 was spent on the project that yields annual benefit of \$60,000 for a period of 8 years without any salvage value. Determine the benefit-to-cost ratio considering the cost of money to be 7%.

A. 1.99 | C. 1.57 |

B. 2.21 | D. 2.63 |

## Derivation of Formula for Sum of Years Digit Method (SYD)

The depreciation charge and the total depreciation at any time m using the sum-of-the-years-digit method is given by the following formulas:

**Depreciation Charge:**

**Total depreciation at any time m**

Where:

FC = first cost

SV = salvage value

n = economic life (in years)

m = any time before n (in years)

SYD = sum of years digit = 1 + 2 + ... + n = n(1 + n)/2