#1. On January1, 2000, Luke bought a RAV4 worth P900,000 and intend to sell it for

P300,000 after its 10 year life. a) What amount had accumulated in the depreciation

reserve at the end of 2003 if the declining balance method was used? (b) using sum-

of-the years digit method, determine depreciation charge for 2004 and the

bookvalue at the of 2004. (c) If, on June 30, 2003, he decided to sell the old car at

bookvalue and buy a new car for P1,000,000, how much more money should Luke

borrow to buy the new car if he used the straight line method in computing the

depreciation every 6 months and made it a point to deposit the said amount in a

bank that offers 10 percent compounded semiannually?

#2. A corporation sold 5,000 issues of 20-year bonds, having a total face value of

P5,000,000, for P4,750,000. The bonds bear interest at 10%, payable semiannually.

a) The company wishes to establish a sinking fund for retiring the bond issue and

will make semiannual deposits that will earn 8% compounded semiannually.

Compute the annual cost for interest and redemption of these bonds.

b) If an investor wishes to dispose of his 100 shares of his bonds at the end of the

10th year, at what price must he sell his bond to give him a profit of 15% nominal

on his investment?

#3. Two installations are being considered to provide for water storage in a chemical

plant. A tank on a tower or a tank of equal capacity placed on a hill some distance

from the plant. The cost of installing the tank and tower is estimated at P350,000. The

cost of installing the tank on the hill, including the extra length of service lines, is

estimated at P300,000. The hill installation will require an additional investment of

P30,000 in pumping equipment whose life is estimated to be 15 years with a salvage

value of P2,500. The life of the two installations is estimated to be 30 years. Annual

cost of labor, electricity, and maintenance incident to the pumping equipment is

estimated at P3,000.

Taxes and insurance for both are 2.5% of the first cost. Money is worth 18% effective.

Which alternative should be used? (USE PW and EUAC)

#4. A certain warehouse is worth P700,000. The average value of the merchandise in the

warehouse is P600,000. The annual insurance rate on the warehouse is 1% and the

merchandise stored in the warehouse is 0.9%. A proposal for the installation of a fire

sprinkler system is being considered. The system will cost P70,000 and will effect a

savings of 50% in both insurance premiums. Annual maintenance cost is estimated to

be P1,500 and annual taxes of P600 for the sprinkler system. The owners of the

warehouse demand that the investment in such equipment be written-off within 10

years. Invested capital can be expected to earn a minimum return of about 20%.

Would you advice the installation? (Use ROR and PW)

#5. The RV company, engaged in the fabrication of automobile engine part with

production capacity of 700,000 units per year, is only operating at 65% capacity due

to unavailability of the necessary foreign currency to finance the importation of their

raw materials. The current annual income is P450,000; annual fixed costs are P190,000

and variable cost are P0.35 per unit. A) What is the current profit/loss? B) What is the

breakeven point in units and in pesos? C) Draw the breakeven chart.

#6. A trucking company in Central Luzon has a fleet of 15 units of 10-wheeler trucks which

are used in hauling sand and gravel from the provinces to Metro Manila. Ten of the

fifteen trucks were purchased five years ago and the other five units were purchased

only recently. Due to the frequent breakdowns, the old trucks could make only an

average of 14 trips per month. Fuel consumption per trip also reaches an average of

P3200. Average maintenance cost per truck per month is P12,000. It is estimated that

these old trucks can still be sold for P180,000 per unit, and that they can still be

operated at least for the next two years.

New trucks could make an average of 22 trips per month. They were purchased at

1,200,000 each only two months ago. It is estimated that the maintenance cost would

average P3200 per month. Fuel consumption was recorded at P1,800 per trip. Interest

rate on capital investment is 18%.

All other out of pocket cost for the old and new trucks are equal. The company has

an average income of P800 per trip.

Because of the frequent breakdowns and high fuel consumption of the old units, the

owner would like to know if it is time to replace his old units. Will it be profitable to

change the old trucks at this time? Support your answers with computations.

Economic life of the new trucks is 5 years.(Use ROR and Annual Cost)

#7. A new water treatment plant proposed for Anytown, has an initial cost of P56 million.

The new plant will service the 7,500 residential customers for the next 30 years. It is

expected to save each customer P125 per year. The plant will require a major

overhaul every 5 years, costing P1million. Determine the benefit/cost ratio at the city's

interest rate of 6%. (Use PW and EUAC)

Anyone who can answer my questions will have 5-star tutor rating. Thank you