Engineering Economy

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


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

  1. Determine the equal-payment-series compound-amount factor after 10 years.
    A.   11.203 C.   9.632
    B.   10.578 D.   8.736
  2. 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
  3. 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


\$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:

$d_m = (FC - SV) \dfrac{n - m + 1}{SYD}$


Total depreciation at any time m

$D_m = (FC - SV) \dfrac{m(2n - m + 1)}{2 \times SYD}$


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

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