CHECC382 ENGINEERING ECONOMICS

What is an annuity?

• the future worth of a present amount

• an annual repayment of a loan

• a series of uniform amounts over a period of time

• a lump sum at the end ofthe year

Costs that are repetitive and occur when an organization produces similar goods or service on a continuing basis.

• direct cost

• recurring cost

• non-recurring cost

• indirect cost

Costs that are difficult to attribute or allocate to a specific output or with activity is

• direct cost

• variable cost

• fixed cost

• indirect cost

What is the formula for a straight line depreciation rate?

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The power of a good service to satisfy human wants

• producer goods

• value

• consumer goods

• utility

The annual depreciation charge equals capital recovery with return for an interest rate of

• 100%

• zero

• greater than zero

• greater than one

How much do you need to invest in equal annual amounts for the next 10 years if you want to withdraw Php 5,000 at the end of the eleventh year and increase the annual withdrawal by Php 1,000 each year thereafter until year 25? The interest rate is 6% compounded annually.

• Php 20,000

• Php 106,117

• Php 8,054

• Php 5,000

Your R & D group has developed and tested computer software that assists engineers in controlling a proper chemical mix for the tire-manufacturing industry. If you decide to market the software, your first year operating net cash flow is estimated to be Php 1,000,000. Because of 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?

• Php 2,507,621

• Php 2,887,776

• Php 2,766,344

• Php 2,047,734

What is the capitalized equivalent amount at 10% of annual interest for a series of annual receipts of Php400 for the first 10 years, which will increase to Php500 per year after 1 0 years and remains constant thereafter?

• Php 4,621

• Php 4,386

• Php 4,452

• Php 9,954

Two options are available for painting your house: (1) oil-based painting which costs Php 5,000 and (2) water-based painting which costs Php 3,000. The estimated lives are 10 years and 5 years respectively. For either option, there is no salvage value at the end of respective service life. Assume that you will keep and maintain the house for 10 years. If your personal interest rate is 10% per year, which of the following statements is correct?

• On annual basis, Option 1 will cost about Php 850.00.

• On annual basis, Option 2 is about Php 22.00 cheaper than Option 1.

• On annual basis, both options cost about the same.

• On annual basis, Option 2 will cost about Php 820.00.