Nueva Vizcaya State University

College of Engineering
CIVIL ENGINEERING DEPARTMENT

ENGINEERING Name
REVIEW MATH
ECONOMICS Course & Yr

I. SIMPLE INTEREST
Elements:
P = principal or present worth
I = interest earned
F = future worth
R = simple interest rate per year
T = time in years
I = Prt
F = P + I = P(1 + rt)
A. Ordinary Simple Interest
1 banker’s year = 12 months = 360 days
1 month = 360 days
B. Exact Simple Interest
Interest is based on the exact number of days of the year

II. COMPOUND INTEREST

Elements:
P = present worth or principal
F = future worth or compound amount
r = nominal rate
m = number of compounding periods per year
i = effective interest per compounding period, i = r/m
t = number of years
n = total number of compounding, n = tm
F = P(1 + i ) ; (1 + i ) = (F / P, i, n ) is called the single payment
n n

compound - amount factor

I = interest earned, I = F – P
= (P / F , i, n ) is called the single payment
F 1
P= ;
(1 + i )n
(1 + i )n
present - worth factor
Continuous Compounding (m → )
F = Pert

Effective rate of interest (ER)

a) in one year
m
interest earned in one year  r
ER = = 1 +  − 1
principal at the beginning of the year  m 

Equivalent Nominal Rates:

Two nominal rates are equal if they have the same effective rates.

III. ANNUITY
Annuity is a series of uniform payments made at equal intervals of time established for the following purposes:

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 1. As payment of a debt by a series of equal payments at equal intervals, also known as amortization
2. To accumulate a certain amount in the future by depositing equal amounts at equal time intervals, also
known as sinking fund.
3. As substitute periodic payment for s future lump sum payment (i.e. insurance premium).
Elements:
R = periodic payment
P = present worth of all periodic payments
F or S = future worth or sum of all the periodic payments after the last payment is made
i = interest rate per payment
n = number of payments
Types of Annuity:
1. Ordinary Annuity – payment is made at the end of each period starting from the first period
Future Worth:
F=

R (1 + i ) − 1
n

i
(1 + i )n − 1 = (F / R, i, n ) - equal - payment - series -
i
compound - amount factor

Present Worth:

P=
 n
 
R (1 + i ) − 1 R 1 − (1 + i )
=
−n

(1 + i )n i i
(1 + i ) − 1 = 1 − (1 + i )  = (P / R, i, n) -
n −n

(1 + i )n i i
equal - payment - series present - worth factor
Periodic Payment if F is known: (Sinking – fund)
Fi
R=
(1 + i )n − 1
= (R / F , i, n ) - equal - payment - sinking -
i
(1 + i )n − 1
fund factor
Periodic Payment if P is known: (Capital Recovery)
P(1 + i ) i
n
R=
(1 + i )n − 1
(1 + i )n i = (R / P, i, n ) - equal - payment - series -
(1 + i )n − 1
capital - recovery factor
2. Deferred Annuity – the first payment if postponed for a certain number of periods after the first.
3. Annuity Due – the payment is made at the beginning of each period starting from the first

IV. PERPETUITY
Perpetuity is and annuity where the payment periods extend forever or the periodic payments continue
indefinitely.
A
P=
i

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V. UNIFORM GRADIENT
1. Arithmetic Uniform Gradient – if the increase in succeeding period is constant
 (1 + i )n − 1  (1 + i )n − 1 n 
Present Worth: P = R  n 
+ A  2 − n
 i(1 + i )   i (1 + i ) i(1 + i ) 
n

 (1 + i )n − 1  (1 + i )n − 1 n 
Future Worth: F = P(1 + i ) n = R   + A  2
− 
 i   i i
2. Geometric Uniform Gradient – if the increase in succeeding period is a percentage
1+ r
a=
1+ i
 (1 + i )n − 1  1− an 
Present Worth: P = R  n 
+ A  (1 + i )(1 + a )
 i (1 + i )   
Future Worth: F = P (1 + i )
n

VI. DEPRECIATION
Depreciation – the decrease in value of a physical property due to the passage of time.
1. Physical Depreciation – caused by lessening of the physical ability of the property to produce results, such as
physical damage, wear and tear.
2. Functional Depreciation – caused by lessening in the demand for which the property is designed to render,
such as obsolescence and inadequacy.

Purposes of Depreciation:
1. to provide recovery of capital which has been invested in the property.
2. to enable the cost of depreciation to be charged to the cost of producing the products that are turned out
by the property.

First Cost – total amount invested on the property until it is put into operation
Economic Life - length of time at which the property can be operated at a profit
Value - the present worth of all the future profits that are to be received through ownership of the property.
Valuation (Appraisal) – process of determining the value or worth of a specific property for specific reasons

Classification of Values:
1. Market Value – the price that will be paid by a willing buyer to a willing seller for a property where each has
equal advantage and is under no compulsion to buy or sell
2. Book Value – the worth of a property as shown in the accounting records of an enterprise.
3. Salvage or Resale Value – the price of a property when sold second hand; also called trade-in value.
4. Scrap Value – the price of a property when sold for junk
5. Fair Value – the worth of a property as determined by a disinterested party which is fair to both seller and
buyer.
6. Use Value – the worth of property as an operating unit

Elements:
FC = first cost
SV = salvage value or trade-in value
d = depreciation charge
n = economic life of the property in years

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 m = any time before n
BVm = book value after m years
Dm = total depreciation for m years
Book Value of the Property at any time:
BVm = FC – Dm

Methods of Computing Depreciation:

1. Straight Line Depreciation
FC − SV
d= Dm = d  m
n
2. Sinking Fund Method

d=
(FC − SV )i
(1 + i )n − 1
d (1 + i ) 1
n
Dm =
i
3. Sum of the Years Digit Method (SOYD)
Sum of the year’s digit, SUM =
n
(1 + n )
2
n − m +1
d m = (FC − SV )
SUM
m(2n − m + 1)
Dm = (FC − SV )
2SUM
4. Declining Balance Method (Constant Percentage Method)
SV
Constant Percentage, K = 1 −
FC
d m = FC (1 − K )
m−1
K
BVm = FC (1 − K )
m

SV = FC (1 − K )
n

5. Double Declining Balance Method

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Depreciation charge to date = xBV at the beginning of the year
n
m
 2
BVm = FC1 −   SV
 n
2
d m = BVm
n
6. Service Output or Production Units Method
FC − SV
d (per unit) =
No. of Units Capacity
7. Working Hours or Machine Hours Method
FC − SV
d (per hour) =
No. of Hours Capacity
VII. CAPITAL RECOVERY

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 If you invest FC now and desires a rate of return r for n periods, and if you can deposit to an account earning an
interest of i for n periods to recover an amount RC and will also receive a salvage value of SV from your invested
property at the end of n periods, then the periodic dividend or income D required is:
1) using the sinking fund method:

D = (FC )r +
(RC − SV )i
(1 + i )n − 1
If RC is not specified, RC = FC.
2) using the straight line method
1  n +1  FC − SV
D=  (FC − SV ) + i ( SV ) +
2  n   n

VIII. CAPITALIZED COST AND ANNUAL COST

Capitalized Cost, K , of a project or a structure is the sum of the first cost (FC) and the present worth of all future
payments and replacements which is assumed to continue forever. Future payments and replacements include
operation and maintenance (OM) for n years, a salvage value (SV) after every n years, and a replacement cost
(RC) after every end of n years. The capitalized cost is:
1. for perpetual life
OM
K = FC +
i
If RC is not specified, use RC = FC
2. For life n:
OM RC − SV
K = FC + +
i (1 + i )n − 1
NOTE: Capitalized cost may also be defined as the first cost plus the present worth of annual maintenance and
operation cost plus the present worth of depreciation assumed to continue forever.

Annual Cost, AC, of a project is the sum of the annual interest on investment, the annual operation and
maintenance cost and the annual depreciation cost.
AC = Ki
AC = (FC )i + OM +
(RC − SV )i
(1 + i )n − 1
IX. BREAK-EVEN ANALYSIS
Break-even Analysis – method of determining the income to equal the expense or the cost of two
alternatives are equal
Break-even Point – the value of a certain variable for which the revenues are equal to the expenses

X. BUSINESS ORGANIZATIONS
A. Types of Business Organizations
1. Individual Ownership or Single Proprietorship – also termed as sole proprietorship and is the type of
ownership in business where individuals exercise and enjoy rights in their own interest. The owner
has the total control of the business and makes all decisions.
2. Partnership – also termed as general partnership and is an association of two or more individuals for
the purpose of operating a business as co-owners of a profit.
3. Corporation – is an artificial being created by operation of law, having the right of succession and
the powers, attributes, and properties expressly authorized by law or incident to its existence. It is
an association of not less than five but not more than 15 persons, all of legal age.
a. Private Corporation – formed for some private purposes or benefits
b. Public Corporation – formed or organized by the government
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 c. Semi-public Corporation – partly government and partly private individual/s
d. Quasi-Public Corporation - formed for public utilities and contracts involving public duties
but which are organized for profit.
e. Non-Profit Corporation – formed for community service and religious activities, organized
for non-profit
Four Classes of Persons Composing a Corporation:
1. Corporators – those who compose the corporation
2. Incorporators – those original corporators who formed the corporation
3. Stockholders – owners of share of stock
4. Members – corporators who has no capital stocks
Stock – certificate of ownership of the corporation
a. Common Stock – residual owners of the corporation
b. Preferred Stock – entitles holders to certain preferences over the holders of common stocks

B. Contracts
Contract – is a legally binding agreement to exchange services

Four Basic Requirements in a Contract:

1. There must be a clear, specific and definite offer with no room for misunderstanding.
2. There must be some form of conditional future payments.
3. There must be an acceptance of the contract and the agreement must be voluntary.
4. Both parties must have legal capacity and the purpose must be legal.

Breach of Contract – occurs when on party fails to satisfy all obligations of the contract.
Negligence – is an action, whether willful or unwillful, which is taken without proper care for safety,
resulting to property damages or injury to persons.
Torts – a civil wrong committed by one person causing damage to another person or his property,
emotional well-being, or reputation

C. BOND
Bond – certificate of indebtedness of a corporation usually for a period of not less than 10 years and
guaranteed by a mortgage on certain assets of the corporation or its subsidiaries.
– a written contract to pay a certain redemption value C on a specified redemption date and to
pay equal dividends D periodically.

Types of Bonds
1. Mortgage Bond – the security behind are the assets of the corporation
2. Collateral Bond – the security behind are the assets of well-known subsidiary
3. Debenture Bond – no security behind except a promise to pay.

Elements:
F = face value or par value of the bond
C = redemption value on a specified redemption date
r = bond rate or dividend rate
D = periodic dividend, D = F x r
i = investor’s interest rate of return
P = price of bond at given interest i
• A bond is said to be redeemable at par if the redemption value C equals the face
value F
• A bond is said to be redeemable at a premium if C > F
• A bond is redeemable at a discount if C < F.
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 Price of a bond at a given i:

P=
C
+
 n

D (1 + i ) − 1
(1 + i )n
(1 + i )n i

XI. BASIC INVESTMENT STUDIES

Basic Investment Studies are made to determine whether an investment should be made or not, based on
the following criteria:
1. Rate of Return – usually stated in percent per year and is an effective annual interest rate
Net Profit
Rate of Return =
Total Investment
2. Payout Period – length of time the investment can be recovered
Total Investment - Salvage Value
Payout Period =
Net Annual Cash Flow

XII. SELECTION OF ALTERNATIVES

Studies on selection of alternatives are made to determine in what manner an investment should be
undertaken, based on the following criteria:
1. Present Economy – involves selection of alternatives in which interest or time value of money is a factor;
usually involves the selection between alternative designs, materials, or methods.
2. Rate of Return – the alternative which gives the highest rate of return on investment is selected
3. Payout Period – the alternative with a shorter payout period is selected
4. Annual Cost – the alternative with lower annual cost is the more economical alternative
5. Present Worth – applicable when alternatives involve future expenses whose present value can be easily
determined
6. Future Worth – applicable when the alternatives involves expenses whose future worth is a more
suitable basis of comparison

XIII. REPLACEMENT STUDIES

This is an application of selection of alternatives in which the alternatives are a) to replace the old
equipment with a new one, or b) to continue using the old equipment. Two criteria commonly used are:
1. Rate of Return
Savings Incurred by Replacement
Rate of Return =
Additional Capital Required
2. Annual Cost

XIV. ECONOMIC ORDER QUANTITY

Economic Order Quantity (EOQ) – order quantity which minimize the inventory cost per unit time. An
assumption of the basic EOQ with no shortages: “There is no upper bound to the quantity ordered.”
2ak
EOQ =
h
where a = the constant depletion rate (items per unit of time)
k = the fixed cost per order (P)
h = the inventory storage cost (P per item per unit of time)

XV. PRINCIPLES OF ACCOUNTING

A. Bookkeeping System – use to record all financial transactions of the company. All transactions are
recorded in a journal then categorized and posted in a ledger. A ledger is classified into asset, liability
and owner’s equity.

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B. Balancing System – balancing the book means maintaining the equality of the basic equation:
ASSETS = LIABILITIES + OWNER’S EQUITY
Double entry bookkeeping system is a balancing system by maintaining the equality by entering each
transaction into two ledger accounts. All transactions are either debits or credits. For liabilities and
owner’s equity, credit increases the account, a debit decreases the account.
C. Cash System – simplest form of bookkeeping system and transactions recorded into the journals are the
present cash and expenses
D. Financial Statements
Financial Statement – a way of determining the success or failure of the company. This is usually
evaluated by accountants, business management and stockholders.
1. Balance Sheet – presentation of the basic accounting equation
2. Profit and loss statement – presentation of income source and expenses. This also known as the
statement of income and retained earnings. Examples of income or revenue are sales, interests, etc.
and for expenses are salaries, supplies, utilities, etc.

Terms used in the Balance Sheet:

a) Current Assets – also known as liquid assets and defined as cash and other assets that can be
converted quickly into cash such as accounts receivables and merchandise.
b) Fixed Assets – properties that will not be converted into cash or difficult to convert into cash
such as buildings, land, machinery, equipment, fixtures, etc.
c) Current Liabilities – liabilities which are due within a short period, usually a year such as
accounts payable and accrued expenses
d) Long-term liabilities – liabilities which are not payable within a short period of time such as
notes payable, and mortgages.

Terms used to evaluate financial statements:

a) Current Ratio – an index of short term paying ability
Curent Assets
Current Ratio =
Current Liabilities
b) Acid Test Ratio – also known as quick ratio and defined as a measure of short-term paying ability
Quick Assets
Acid - Test Ratio =
Current Liabilities
c) Receivable Turnover – measure the speed of collection of accounts receivable
Net Sales on Credit
Receivable Turnover =
Average Receivables
d) Gross Margin – gross profit as a percentage of sales
Gross Profit
Gross Margin =
Net Sales
e) Profit Margin Ratio – percentage of sales that is net income
Net Incme Before Tax
Profit Margin Ratio =
Net Sales
f) Return on Investment Ratio – percent return on investment
Net Income
Return on Investment =
Owner's Equity

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 PROBLEMS IN ENGINEERING ECONOMY AND ACCOUNTING

PROBLEM SET 1: SIMPLE AND COMPOUND INTEREST

1. A man lends P 6 000 at 6% simple interest for 4 years. At the end of this time, he invests the entire amount at
5% compounded annually for 12 years. How much would he have at the end of the 16-year period?
2. Annie buys a television set from a merchant who offers P 25 000 at the end of 60 days. Annie wishes to pay
immediately and the merchant offers to compute the required amount on the assumption that money is worth
14% simple interest. What is the required amount?
3. A bank charges 12% simple interest on a P300 000 loan. How much will be repaid if the loan is paid back in one
lump sum after 3 years.
4. A time deposit of P110,000 for 31 days earns P890.39 on maturity date after deducting the 20% withholding tax
on interest income. Find the rate of interest per annum.
5. The tag price of a certain commodity is for 100 days. If paid in 31 days, there is a 3% discount. What is the simple
interest paid?
6. How long will it take for an investment to double its amount if invested at an interest rate of 6% compounded
bi-monthly?
7. Mr. Adam deposited P 120 000 in a bank who offers 8% interest compounded quarterly. If the interest is subject
to a 14% tax, how much will he receive after 5 years?
8. In year zero, you invest P 10 000 in a 15% security for 5 years. During that time, the average annual inflation is
6%. How much will be in the account at the maturity?
9. By the conditions of a will, the sum of P 25 000 is left to a girl to be held in a trust fund by her guardian until it
amount to P 45 000.When will the girl receive the money if the fund is invested at 8% compounded quarterly?
10. With interest at 6% compounded annually, how much is required 7 years hence to repay an P 8 M loan made
today?

PROBEM SET 2: ANNUITY

1. A man wishes his son to receive P 500 000 ten years from now. What amount should be invested now if it will
earn interest of 12% compounded annually during the first 5 years and 15% compounded quarterly during the
next 5 years?
2. A contractor bought a concrete mixer at P120 000 if paid in cash. The mixer may also be purchased by
installment to be paid within 5 years. If money is worth 8% and all payments are made at the beginning of each
year, how much is the amount of annual payment?
3. A man receives P 125 000 credit for his old car when buying a new model costing P375 000. What cash payment
will be necessary so that the balance can be liquidated by payments of P12 500 at the end of each month for 18
months when interest is charged at the rate of 6% compounded monthly?
4. A man borrowed P 200 000 from a bank at 12% compounded monthly which is payable in 10 years (120
payments). If the first payment is to be made after 3 months, how much is the monthly payment?
5. To maintain its newly acquired equipment, the company needs P 40 000 per year for the first 5 years and P 60
000 per year for the next five years. In addition, an amount of P 140 000 would also be needed at the end of the
fifth and eighth years. At 6%, what is the present worth of these costs?
6. A man inherited a regular endowment of P 100 000 every end of 3 months for 10 years. However, he may
choose to get a single lump sum payment at the end of 4 years. How much is this lump sum if the cost of money
is 14% compounded quarterly?
7. A service car whose cash price was P 540 000 was brought with a down payment of P 162 000 and monthly of
P10 874.29 for 5 years. What was the rate of interest if compounded monthly?
8. A house and lot can be acquired at a down payment of P 500 000 and a yearly payment of P 100 000 at the end
of each year for a period of 10 years starting at the end of 5 years from the date of purchase. If money is worth
14% compounded annually, what is the cash price of the property?

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 9. Find the present value of a perpetuity of P 15 000 payable semi-annually if money is worth 8% compounded
quarterly.
10. A debt of x pesos, with interest rate of 7% compounded annually will be retired at the end of 10 years through
the accumulation of deposit in the sinking fund invested at 6% compounded semi-annually. The deposit in the
sinking fund every end of six months is P 21 962.68. What is the value of x?

PROBLEM SET 3: DEPRECIATION AND CAPITALIZED COST

1. A man bought an equipment which cost P524 000. Freight and installation expenses cost him P 31 000. If the life
of the equipment is 15 years with an estimated salvage value of P120 000, find its book value after 8 years?
2. An equipment costing P 250 000 has an estimated life of 15 years with a book value of P 30 000 at the end of the
period. Compute the depreciation charge and its book value after 10 years using (a) straight line method, (b)
sinking fund method, (c) declining balance method, and (d) SOYD.
3. A machine costing P 45 000 is estimated to have a salvage value of P 4 350 when retires at the end of 6 years.
Depreciation cost is computed using a constant percentage of declining book value. What is the annual rate of
depreciation in %?
4. An engineer bought an equipment for P 500 000. Other expenses including installation amounted to P 30 000. At
the end of its estimated useful life of 10 years, the salvage value will be 10% of the first cost. Using straight line
method of depreciation, what is the book value after 5 years?
5. A company purchased an asset for P 10 000 and plans to keep it for 20 years. If the salvage value is zero at the
end of the 20th years, what is the depreciation in the third year? Use sum-of-the-years digit depreciation.
6. A company uses a type of truck which costs P 2M with life of 3 years and a final salvage value of P 320 000. How
much could the company afford to pay for another type of truck for the same purpose whose life is 4 years with
a final salvage value of P 400 000, if money is worth 4%.
7. At 6%, find the capitalized cost of a bridge whose cost is P200 M and life is 20 years, if the bridge must be
partially rebuilt at a cost of P 100 M at the end of each 20 years.
8. It is estimated that a timber tract will yield an annual profit of P 100 000 for 6 years, at the end of which time
the timber will be exhausted. The land itself will then have an anticipated value of P 40 000. If the prospective
purchaser desires a return of 8% on his investment and can deposit money in a sinking fund at 4%, what is the
maximum price he should pay for the tract?
9. An investor pays P 1 100 000 for amine which will yield a net income of P 200 000 at the end of each year for 10
years and then will become useless. He accumulates a replacement fund to recover his capital by annual
investments at 4.5%. At what rate does he receive interest on his investment at the end of each year?
10. Machine cost = $15 000; life = 8 years; salvage value = $3 000. What minimum cash return would the investor
demand annually from the operation of this machine if he desires interest annually at the rate of 8% on his
investment and accumulates a capital replacement fund by investing annual deposits at 5%.

PROBLEM SET 4: BONDS AND BREAK EVEN ANALYSIS

1. A P 100 00, 6% bond, pays dividend semi-annually and will be redeemed at 110% on July 1 2009. Find its price if
bought of July 1, 2006, to yield an investor 4% compounded semi-annually.
2. A community wishes to purchase an existing utility valued at P 500 00 by selling 5% bonds that will mature in 30
years. The money to retire the bond will be raised by paying equal annual amounts into a sinking fund that will
earn 4%. What will be the total annual cost of the bonds until they mature?
3. A man paid P 110 000 for a P 100 000 bond that pays P 4000 per year. In 20 years, the bond will be redeemed
for P 105 000. What net rate of interest will the man obtain on his investment?
4. A man wants to make 14% nominal interest compounded semi-annually on a bond investment. How much
should the man be willing to pay now for a 12%, P 10 000 bond that will mature in 10 years and pays interest
semi-annually?
5. A company issued 50 bonds of P 1 000 face value each, redeemable at par at the end of 15 years. To accumulate
the funds required for redemption, the firm established a sinking fund consisting of annual deposits, the interest
rate of the fund being 4%. What was the principal in the fund at the end of the 12 th year?

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 6. XYZ Corporation manufactures bookcases that it sells for P 65 each. It cost XYZ P 35 000 per year to operate its
plant. This sum includes rent, depreciation charges on equipment, and salary payments. If the cost to produce
one bookcase is P 50, how many bookcases must be sold each year for XYZ to avoid taking loss?
7. Determine the break-even point in terms of number of units produced per month using the following data:
Selling price per unit P 600
Total monthly overhead expenses 428 000
Labor Cost per unit 112
Cost of materials per unit 76
Other variable cost 2.32

PROBLEM SET 5: ELEMENTS OF ENGINEERING ECONOMY

1. The recorded current value of an asset is known as:
a) Scrap value b) book value c) salvage value d) present worth
2. The ratio of the interest payment to the principal for a given unit of time and is usually expressed as a
percentage of the principal is known as:
a) Investment b) nominal interest c) interest d) interest rate
3. A method of depreciation whereby the amount to recover is spread over the estimated life of the asset in terms
of the periods or units of output is called:
a) SOYD Method b) Declining balance c) straight line method d) sinking fund method
4. The interest rate at which the present worth of cash flow on a project is zero, or the interest earned by an
investment.
a) Rate of return b) effective rate c) nominal rate d) yield
5. The lessening of the value of an asset due to the decrease in the quantity available. This refers to the natural
resources such as coal, oil, and timber in the forest.
a) Depreciation b) depletion c) inflation d) incremental cost
6. The method of depreciation where a fixed sum of money is regularly deposited at compound interest in a real or
imaginary fund in order to accumulate an amount equal to the total depreciation of an asset at the end of the
asset’s estimated life is known as:
a) Straight line method b) SOYD Method c) Declining balance method
d) sinking fund method
7. The term used to express the series of uniform payments occurring at equal interval of time is:
a) Compound interest b) annuity c) perpetuity d) depreciation
8. The profit derived from a project or business enterprise without consideration of obligations to financial
contributors and claims of others based on profit is known as:
a) Yield b) economic return c) earning value d) expected yield
9. As applied to capitalized asset, the distribution of the initial cost by periodic changes to operation as in
depreciation or the reduction of the debt by either periodic or irregular prearranged program is called;
a) Amortization b) annuity c) depreciation d) capital recovery
10. Those funds that are required to make the enterprise or project a going concern.
a) Banking b) accumulated amount c) working capital d) principal or present worth
11. These are products or services that are desired by humans and will be purchased if money is available after the
required necessities have been obtained.
a) Utilities b) necessities c) luxuries d) producer goods and services
12. These are product or services that are required to support human life and activities that will be purchased in
somewhat the same quantity even though the price varies considerably.
a) Utilities b) necessities c) luxuries d) producer goods and services
13. A condition where only few individuals produce a certain product and that any action of one will lead to almost
the same action of the others.
b) Oligopoly b) semi-monopoly c) monopoly d) perfect competition
14. This occurs in a situation where a commodity or service is supplied by a number of vendors and there is nothing
to prevent additional vendors entering the market.
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 a) Perfect competition b) monopoly c) oligopoly d) elastic demand
15. It is the amount that a willing buyer will pay to a willing seller for a property where each has equal advantage
and is under no compulsion to buy or sell.
a) Fair value b) use value c) market value d) book value
16. It is defined to be the capacity of a commodity to satisfy human want.
a) Discount b) luxuries c) utility d) necessity
17. A form of summary of assets, liabilities and net worth.
a) Balance method b) break-even point c) balance sheet d) production
18. The worth of a property which is equal to the original cost less depreciation is known as:
a) Earning value b) scrap value c) book value d) face value
19. When using the present worth calculations to compare two projects, which of the following could invalidate the
calculations?
a) Mutually exclusive projects c) evaluation over different periods
b) Non-conventional cash flow d) difference in the magnitude of the projects
20. Which of the following is a form of business/company ownership?
a) Partnership b) corporation c) single proprietorship d) all of these
21. What must two investments with the same present worth and unequal lives have?
a) Identical salvage value c) different salvage values
b) Identical equivalent uniform annual cash flows d) different equivalent annual cash flows
22. The amount received from the sale of an additional unit of a product is termed as:
a) Marginal cost b) marginal utility c) marginal unit d) marginal revenue
23. An accounting book where the original record of all transactions is ordinarily recorded.
a)journal b) credit entry c) debit entry d) transaction record
24. An interest-earning fund in which equal deposits are made at equal interval of time for the purpose of gradually
accumulating a specific sum of money required at some future date.
a) Amortization b) sinking fund c) annuity d) capitalized cost
25. What is work-in-process classified as?
a) An asset b) a liability c) an expense d) owner’s equity

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