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Problem Set 6. Comparing Alternatives

The document contains 6 questions from a civil engineering problem set regarding comparing alternatives using financial analysis methods. Question 1 asks to determine the present worth of a computer purchase. Question 2 asks if an equipment investment is justified using future worth analysis. Question 3 asks to determine the number of days per year a truck must be used to warrant its purchase over renting. Question 4 asks to determine the annual cost of a structure given its cost and salvage value. Questions 5 and 6 ask to calculate annuity payments and rate of return respectively given financial inputs.

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MICHAELDANE SALANGUIT
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149 views

Problem Set 6. Comparing Alternatives

The document contains 6 questions from a civil engineering problem set regarding comparing alternatives using financial analysis methods. Question 1 asks to determine the present worth of a computer purchase. Question 2 asks if an equipment investment is justified using future worth analysis. Question 3 asks to determine the number of days per year a truck must be used to warrant its purchase over renting. Question 4 asks to determine the annual cost of a structure given its cost and salvage value. Questions 5 and 6 ask to calculate annuity payments and rate of return respectively given financial inputs.

Uploaded by

MICHAELDANE SALANGUIT
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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UNIVERSITY OF THE EAST – MANILA

COLLEGE OF ENGINEERING
DEPARTMENT OF CIVIL ENGINEERING

PROBLEM SET 6
COMPARING ALTERNATIVES

Answer each question carefully. Write your solutions on the template provided for NCE
4103. Send your papers in Canvas Assignments.

1. A computer is purchased for P35,000, it is expected to be used for six years and will be
sold for P5,000 after that time. Annual operations, maintenance, and software cost is
expected to be P10,000. For a 9% rate of return, determine the present worth of this
investment.

2. A new equipment that will increase revenue by P94,500 a year requires an investment of
P430,000. It is estimated to have a net salvage value of P50,000 at the end of 12 years, with
annual expenses for repairs and maintenance totaling P15,000. Determine if the investment
is justified using future worth analysis and an 18% rate of return.

3. A contractor can buy trucks for P800,000 each, or rent them for 1200 per truck per day.
The truck has a salvage value of P100,000 at the end of its useful life of five years. The annual
maintenance cost is P20,000 per truck. Using the annual cost method and 14% interest rate,
determine the number of days per year that each truck must be used to warrant its purchase.

4. Determine the annual cost of a structure that requires P15M to build with a salvage value
of P2M after 12 years if interest is 6%.

5. A man pays P15,000 annually starting at the end of the 5th year until at the end of the 10th
year, P20,000 at the end of the 11th year until at the end of the 15th year, and P35,000
annually for the succeeding 5 years. With 10% interest, what annuity should he pay for 20
years to settle that amount equally?
6. A small machine has an initial cost of P20,000 with a salvage value of P2,000 and a life of
10 years. If your cost of operation per year is P35,000 and your revenues per year is P9,000,
what is the approximate rate of return on the investment?

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