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ENGINEERING ECONOMY
Take-Home QUIZ#1
Due on March 3, 2016, until 5pm
Solve the following problems. (Show all your
calculations and draw the cash flow diagram)
1. A woman deposits an annual bonus into a
savings account that pays 6% interest
compounded monthly. The size of the
bonus increases by $1,000 each year, and
the initial bonus amount was $3,000.
Seven deposits were made. Determine
how much will be the amount five years
after her last deposit.

revenue at the end of each year in the ten

year study period is $300,000. The
estimated annual year end expenses are
$30,000 starting in year 1. The expenses
begin increasing by $5,000 per year at the
end of year four and continue increasing
through the end of year 10. What is the
equivalent present value of this proposal if
interest is at 12% compounded
continuously?

2. What is the amount of 20 equal semi-annual

deposits that can provide ten semi-annual
withdrawals, when a first withdrawal of $3,000 is
made at the end of year 15, and subsequent
withdrawals increase at the rate of 6% per
semiannual over the previous years, if
a.
The interest rate is 8%, compounded
annually?
b.
The interest rate is 6%, compounded
annually?

3. A certain proposal has a capital

investment of $640,000. Estimated annual

4. An End-of-Year (EOY) geometric gradient

lasts for 15 years, whose initial value at
EOY three is $5,000 and = 6% per year
thereafter. Find the equivalent uniform
gradient amount (G) over the same time
period (beginning at the end of year 1 and

end at the end of 17 ) if the initial value of

the series at EOY one is $4,000. Answer
the following quest ions in determining the
value of the gradient amount, G (the
interest rate is 9% per year compounded
quarterly):
a. What is P0 for the geometric
gradient?
b. What is the value of G?
c. What is P0 for the arithmetic
gradient?

5. An electronic device is available that will

reduce this years labor cost by
$10,000.The equipment is expected to last
for eight years. If labor cost increase at an
average rate of 7% per year at interest
rate is 12% compounded bimonthly
a. What is the maximum amount
that we could justify spending
for the device?
b. What is the uniform annual
equivalent value (A) of labor
costs over the eight year
period?

6.

A self employed individual, Jimmy

Carpenter, is opening a retirement

account at a bank. His goal is to

accumulate P2,000,000 in the account by
the time he retires from work in 20 years.
A local bank is willing to open a retirement
account that pays 8% interest,
compounded quarterly, throughout the 20
years. He wishes to start with a deposit at
the end of the end of 1st semiannual and
increase the deposit by P5,000 per
semiannual, what should be the size of
his first deposit?