ENGINEERING ECONOMY

PROBLEMS ON ARITHMETIC AND GEOMETRIC GRADIENT/

CAPITALIZED COST
1. A student deposited an amount of P75,000 on a bank that
earns 12% compounded monthly. After such deposits, the
student wish to continue depositing an amount every end of
the month for a period of one year. The first monthly deposit is
P5,500 and succeeding monthly deposits increases by P1,000
until the last period.
a.) What was the expected amount on his account?
b.) On the point of view of the student, how much interest was
accrued by his deposits?
2. A certain property was offered for sale where the buyer
needs to pay 25% of the cash prize as downpayment.
Remaining balance to be paid every quarter for a period of 3
years wherein the first quarterly payment happens after a year
the property was purchased. The amount of the first quarterly
payment is P120,000 and succeeding quarterly payments
decreases by P5,000 until the end of the payment period.
Money is 10% effective.
a.) What was the cash prize of the property?
b.) If after eight quarterly successive payments, the buyer
wishes to settle the remaining balance by just a single amount
at the end of the payment period, how much would it be?
3. A certain property was offered for sale. It is expected to
appreciate to a value of P1.5 Million ten years from now. The
owner of the property has the following conditions for a buyer
for its repayment. No downpayment is necessary but an equal
beginning of a quarter amounting to P7,500 be made upon
purchase for a period of 3 years. After the quarterly payments,
an end of a month payment is necessary wherein monthly
payments increases by 10% every month thereof for a period
of 5 years. Money worth 8% effective.
a.) What was the 1st and the 50th monthly payments?
b.) On totality, how much amount would the buyer make for
this property?

c.) If the buyer opted to change the monthly payments by an

equal payment at the end of every semi-annual period for 3
years, what would the semi-annual payments be?
4. A student deposited an amount of P100,000 on a bank that
earns 11% compounded monthly. The next deposit happens
every month thereof on which such deposit decreases by 15%
of the preceding deposit for a period of 2 years. Assuming no
withdrawals take place,
a.) What was the expected amount of money for the account
after the 2-year deposit?
b.) If the student fails to give the last 4 monthly deposits, how
much would be expected on his account after 2 years?
c.) If the student wishes to withdraw all of his money a year
after all of his monthly deposits, how much would it be?
5. A chemical reactor worth P375,000 was purchased and
P25,000 is charged for the installation and transportation. Tax
due to importation is 3% of the cash price. This reactor is
expected to last indefinitely as long as annual maintenance of
P30,000 be done. Money is worth 10% effective. What is the
capitalized cost of the chemical reactor?
6. A wooden electrical post for electrical power distribution
costs P150,000 each with an installation charges of P7,500.
This type of post needs an annual maintenance of P2,000
before replacement after 10 years with a scrap value of
P7,500. Another type of post made up of concrete will cost
15% higher than the wooden post with installation charges
amounting to P10,000. However, concrete posts does not need
maintenance and will be replaced in such a time with a scrap
value of P20,000. If both posts has the same capitalized cost,
what is the approximate life of the concrete post? Money is
12% effective?
7. A research laboratory is to be constructed at P100,000,000
and is expected to last for 20 years with replacement cost of
P200,000,000. Operation and maintenance expenses are P10
Million each year for 5 years, P20 Million each year for the next
6 years and P50 Million each year thereafter. If money is worth
8% per year, compute the capitalized cost.

8. The will of a wealthy philanthropist left P50 million to

establish a perpetual charitable foundation. The foundation
trustees decided to spend P12 Million to provide facilities
immediately and to provide P1 Million of capital replacement
at the end of each 5-year period. If the invested funds earned
12% per annum, what would be the year-end amount available
in perpetuity from the endowment for charitable purposes?