Information systems and engineering economics | Set 2
1. Record date of birth of the resident, indicating day, month and in the relevant field.
Correct : C. year
2. has to be recorded by the Enrolment Agency as declared by the enrollee in the box provided by recording Male, Female or Transgender.
Correct : B. gender
3. Which of the following is used to retrieve pre-enrolment data?
Correct : A. pre-enrolment id
4. The factors of time and are the defining aspects of any
engineering economic decisions
Correct : A. uncertainty
5. Economic decisions differ in a fundamental way from the types of
decisions typically encountered in engineering design.
Correct : A. true
6. ENGINEERING ECONOMICS INVOLVES
Correct : D. all
7. The factors of time and uncertainty are the defining aspects of any
engineering economic decisions
Correct : A. true
8. An instant dollar is worth more than a distant dollar
Correct : A. true
9. engineering economic decision refers to all investment decisions
relating to engineering projects.
Correct : A. true
10. engineering economic decision is the evaluation of costs and benef
associated with making a capital investment.
Correct : A. true
11. Engineering economics is needed for many kinds of decision making
Correct : A. true
12. The factors of and uncertainty are the defining aspects of
any engineering economic decisions
Correct : A. time
13. Additional risk is not taken without an expected additional return of
suitable magnitude
Correct : A. true
14. Money has a time value because it can earn more money over time
(earning power).
Correct : A. true
15. F dollars at the end of period N is equal to a single sum P dollars now,
if your earning power is measured in terms of interest rate i.
Correct : A. true
16. Initial amount of money in transactions involving debt or investments
is called the principal (P).
Correct : A. true
17. engineering economic decision is the evaluation of costs and benef
associated with making a capital .
Correct : B. investment.
18. Initial amount of money in transactions involving debt or investments
is called
Correct : B. principal
19. How many years would it take an investment to double at 10% annual
interest?
Correct : A. 7.27 years
20. Marginal revenue must exceed marginal cost, in order to carry out a
profitable increase of operations
Correct : A. true
21. A plan for receipts or disbursements (An) that yields a particular cash flow pattern over a specified length of time is called monthly equal
payment
Correct : A. true
22. At 8% interest, what is the equivalent worth of $2,042 after 5 years
from now?
Correct : D. 3000
23. If you had $2,000 now and invested it at 10%, how much would it be
worth in 8 years?
Correct : B. 4287
24. Money has a time value because its purchasing power changes over
time (inflation).
Correct : A. true
25. Interest is the cost of moneyas a cost to the borrower and an earning
to the lender
Correct : A. true
26. Cash Flow is the movement of money (in or out) of a project
Correct : A. true
27. the practice of charging an interest rate to an initial sum and to any
previously accumulated interest that has not been withdrawn.
Correct : A. compound interest
28. Given P = $1,000 , i = 8% and N = 3 years calculate future value using
Compound interest
Correct : B. 1259.71
29. Calculate future value on the principal amount of Rs. 2000 at the
interest rate of 6% for the period of 5 years using simple interest
Correct : C. 2600
30. Economic equivalence refers to the fact that a cash flow-whether a
single payment or a series of payments-can be converted to an equivalent cash flow at any point in time.
Correct : A. true
31. If you deposit P dollars today for N periods at i, you will have F dollars
at the end of period N.
Correct : A. true
32. You want to set aside a lump sum amount today in a savings account that earns 7% annual interest to meet a future expense in the amount of $10,000 to be incurred in 6 years. How much do you need to deposit
today?
Correct : B. 6663
33. A fund accumulated by periodic deposits and reserved exclusively for
a specific purpose, such as retirement of a debt
Correct : A. sinking fund
34. A fund created by making periodic deposits (usually equal) at compound interest in order to accumulate a given sum at a given
future time for some specific purpose is sinking fund
Correct : A. true
35. the practice of charging an interest rate only to an initial sum (principal amount) is
Correct : B. simple interest
36. Suppose that you invest $1 for 1 year at 18% compounded monthly.
How much interest would you earn?
Correct : A. 19.56 % compounded annu
37. Effective Interest Rate is Actual interest earned or paid in a year or some other time period
Correct : A. true
38. Suppose that you invest $1 for 1 year at 18% compounded monthly.
How much interest would you earn?
Correct : D. all true
39. Nominal Interest Rate is Interest rate quoted based on an annual period
Correct : A. true
40. The annual equivalent worth (AE) criterion provides a basis for
measuring investment worth by determining equal payments on an annual basis.
Correct : A. true
41. When only costs are involved, the AE method is sometimes called the
annual equivalent cost method.
Correct : A. true
42. In AE analysis revenues must cover two kinds of costs:– Operating
costs and Capital recovery costs
Correct : A. true
43. Operating costs are incurred by the operation of physical plants or
equipment needed to provide service
Correct : A. true
44. Capital recovery costs are incurred by purchasing assets to be used in production and service.
Correct : A. true
45. Consider a machine that costs $20,000 and has a five-year useful life.At the end of the five years, it can be sold for $4,000 after all tax adjustments have been factored in. If the firm could earn an after-tax revenue of $4,400 per year with this machine, should it be purchased at an interest rate of 10%? (All benefits and costs associated with the
machine are accounted for in these figures.)
Correct : A. -220.76
46. Inflation is a loss in the purchasing power of money over time.
Correct : A. true
47. is a loss in the purchasing power of money over time.
Correct : A. inflation
48. The same dollar amount buys less of an item over time is
Correct : A. inflation
49. Consumer Price Index (CPI) Measures prices of typical purchases made
by consumers, based on a typical market basket of goods and services required by average consumers
Correct : A. true
50. CPI does not take into the account the price of raw material, finished
product and operating cost
Correct : A. true
51. PPI measures average change over a time in selling prices by domestic
producers of goods and services.
Correct : A. true
52. Inflation rate is defined as the rate at which the cost general level of goods and services increases resulting in decreases of purchasing
Correct : A. true
53. Actual (current) dollars (An)is the dollar value that is “influenced” by
inflation.
Correct : A. true
54. Actual (current) dollars (An)is the dollar value that is “influenced” by
.
Correct : B. inflation
55. dollars is the dollar value that is “influenced” by inflation.
Correct : A. actual
56. Constant (real) dollars reflect constant purchasing power independent
of the passage of time
Correct : A. true
57. The current gasoline price is $4.15, and it is projected to increase next year by 5%, and 8% the following year, and -3% the third year. What is the average inflation rate for the projected gasoline price for the next 3
years?
Correct : A. 0.0323
58. If the inflation rate is 6% per year and the market interest rate is known to be 15% per year. What is the implied real interest rate in this
inflationary economy?
Correct : D. 0.0849
59. If you experience a 6 % annual inflation, how long does it take to see
the purchasing power being reduced in half?
Correct : C. 12 years
60. The CPI for 2000 was 171.2 and the projected CPI for 2008 is 220. What
is the general inflation rate over the last 8 years?
Correct : C. 0.0318
61. The average starting salary for engineers for 2008 is $53,000. What is the equivalent salary in terms of purchasing power of 2000? Assume
that the general inflation rate over the last 8 years is known to be 4%.
Correct : C. 72534
62. You are considering purchasing a $1,000 bond with a coupon rate of 9.5%, interest payable annually. If the current inflation rate is 4% per year, which will continue in the foreseeable future, what would be the
real rate of return if you sold the bond at $1,080 after 2 years?
Correct : D. about 8.9%
63. You are purchasing an automobile priced at $20,000 by borrowing at 12% interest compounded monthly. The loan will be repaid in monthly installments for five years. What is the constant dollar value (value at the time of financing) of the 36th payment of this loan, if the general
inflation rate is 5% compounded monthly?
Correct : B. 383.66
64. A couple wants to save for their daughter’s college expense. The daughter will enter college 8 years from now and she will need
$40,000, $41,000, $42,000 and $43,000 in actual dollars for 4 school years. Assume that these college payments will be made at the beginning of the school year. The future general inflation rate is estimated to be 6% per year and the annual inflation-free interest rate is 5%. What is the equal amount, in actual dollars, the couple must
save each year until their daughter goes to college (for 8 years)?
Correct : B. 11838
65. An investment project costs P. It is expected to have an annual net
cash flow of 0.125P for 20 years. What is the project’s payback period?
Correct : D. 8 year
66. Which of the following statements is incorrect?
Correct : B. if two investors are considering the same project, the payback period will be longer for the investor with the higher marr.
67. Find the net present worth of the following cash flow series at an
interest rate of 10%
Correct : B. $600 < pw(10%) ≤ $650
68. You are considering buying an old house that you will convert into an office building for rental. Assuming that you will own the property for 10 years, how much would you be willing to pay for the old house
now given the following financial data?
Correct : D. 218420
69. Your R&D group has developed and tested a computer software package that assists engineers to control the proper chemical mix for the various process manufacturing industries. If you decide to market the software, your first year operating net cash flow is estimated to be
$1,000,000. Because of market competition, product life will be about 4 years, and the product’s market share will decrease by 25% each year over the previous year’s share. You are approached by a big software house which wants to purchase the right to manufacture and distribute the product. Assuming that your interest rate is 15%, for
what minimum price would you be willing to sell the software?
Correct : C. 2047734
70. Find the capitalized equivalent worth for the project cash flow series
at an interest rate of 10%.
Correct : B. ce(10%) ⇓ = ⇓ $1,548
71. The following table contains a summary of how a project’s balance is expected to change over its 5 year service life at 10% interest.:Which of the following statements is incorrect?
Correct : B. the required additional investment at the end of period 1 is $500
72. Reconsider the project balance table calculated at 10% given in 5.9.:Which of the following statements is correct?
Correct : A. the cash flow in period 3 is $240
73. A newly constructed water treatment facility cost $2 million. It is estimated that the facility will need renovating every 30 years at a cost of $1 million. Annual repairs and maintenance are estimated to be
$100,000 per year. At an interest rate of 6%, determine the capitalized
cost of the facility.
Correct : B. 3877482
74. Consider the following two investment alternatives:Suppose that your firm needs either machine for only 2 years. The net proceeds from the sale of machine B are estimated to be $200. What should be the required net proceeds from the sale of machine A so that both machines could be considered economically indifferent at an interest
rate of 10%?
Correct : C. 750
75. Gene Research, Inc. just finished a 4-year R&D and clinical trials successfully and expects a quick approval from the Food and Drug
Administration. If the company markets the product on their own, it requires $30 million immediately (n ⇓ = ⇓ 0) to build a new manufacturing facility, and it is expected to have a 10 year product life.
The R&D expenditure in the previous years and the anticipated revenues that the company can generate over the next 10 years is summarized as follows:Merck, a large drug company is interested in purchasing the R&D project and the right to commercialize the product from Gene Research, Inc., immediately (n□ =□ 0). What would be a starting negotiating price for the project from Merck? Assume that
Gene’s MARR ⇓ = 20%.
Correct : A. $524 million
76. A manufacturing company is considering the purchase of a new CNC lathe, which will cost $60,000 and has an annual maintenance cost of
$8,000. A few parts in the lathe need to be replaced once every 5 years to enable smooth running of the lathe. This would cost an additional
$20,000 (once every 5 years). Assuming that the lathe would last 15 years under these conditions, what is the total equivalent cost (present value) of this investment at an interest rate of 12%? (Assume that
there will be no appreciable salvage value at the end of 15 years.)
Correct : B. 132275
77. A manufacturing company is considering two mutually exclusive machines E1 and E2 with the following cash flow information:Which machine would you recommend if the company needs either machine for only 3 years? Assume a MARR of 12%
Correct : D. project e2
78. Consider a project with a first cost (investment) of $250,000, an annual O&M cost of $50,000, annual revenue of $160,000, and a salvage value of $40,000 after a 10-year life. Find the annual worth of the project assuming an interest of 13% per year.
Correct : D. 66099
79. Find the annual equivalent worth for the following infinite cash flow series at an interest rate of 10%:
Correct : D. 438.6
80. Your firm has purchased an injection molding machine at a cost of
$100,000. The machine’s useful life is estimated at 8 years. Your accounting department has estimated the capital cost for this machine at about $25,455 per year. If your firm’s MARR is 20%, how much salvage value do you think the accounting department assumed at the end of 8 years?
Correct : C. 10000
81. You just purchased a pin inserting machine to relieve some bottleneck problems that have been created in manufacturing a PC board. The machine cost $56,000 and has an estimated service life of 5 years. At that time, the estimated salvage value would be $5,000. The machine is expected to operate 2,500 hours per year. The expected annual operating and maintenance cost would be $6,000. If your firm’s
interest rate is 15%, what would be the machine cost per hour?
Correct : A. 8.79
82. The following infinite cash flow series has a rate of return of 10%. Determine the unknown value of X.
Correct : D. 90
83. An asset with a first cost of $100,000 is depreciated over 5-year period. It is expected to have a $10,000 salvage value at the end of 5 years.
Using the straight-line method, what is the book value at the end of
year 2?
Correct : C. 64000
84. The rate of tax that is leivable on STCG arising from transfer of Equity shares of a
Company or units of an Equity oriented fund is
Correct : B. 0.15
85. For an employee in receipt of hostel expenditure allowance for his three children, the maximum annual allowance exempt under section 10(14) is
Correct : B. rs.7,200
86. For an industrial undertaking fulfilling the conditions, additional depreciation in respect of machinery costing Rs.10 lakh acquired and installed on October 3, 2005 is
Correct : C. rs.1,00,000
87. A.O.P should consist of :
Correct : C. both the above
88. Body of individual should consist of :
Correct : A. individual only
89. A new business was set up on15-11-2008 and it commenced its business from 1-12-2008. The first previous year in this case shall be:
Correct : A. 15-11-2008 to 31-3-2009
90. A person leaves India permanently on 15-11-2008.The assessment year for income earned till 15-11-2008 in this case shall be:
Correct : B. 2008-09
91. As per section 30, which expenditure incurred for a building used for the business or profession shall not be allowed as deduction?
Correct : D. capital expenditure
92. Group of assets falling within a class of assets comprising of tangible & intangible assets is known as :
Correct : B. block of assets
93. Depreciation available, if the asset is used for less than 180 days during the year of acquisition shall be of block rate:
Correct : A. 50%
94. If the Plant & Machinery is used for less than 180 days in the year of its acquisition, then, at what rate the depreciation on that asset should be provided under section 32?
Correct : A. 7.5%
95. If the machinery is purchased on 4th October, 2018 then at what rate depreciation will be provided on it?
Correct : B. 7.5%
96. The transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in the sale is known as :
Correct : B. slump sale
97. Rate of depreciation chargeable on fully temporary wooden structure for the assessment year 2019-20 is
Correct : D. 40%
98. Rate of depreciation chargeable on temporary wooden structure for the assessment year 2019- 20 is - A. 40% B. 10% C. 100% D. 50%.
Correct : A. 40%
99. DS acquired a building for Rs. ` 15 lakh in June, 2016 in addition to cost of land beneath the building of ` 3 lakh. It was used for personal purposes until he commenced business in June, 2018 and since then it was used for business purposes. The amount of depreciation eligible in his case for the assessment year 2019-20 would be -
Correct : C. rs.37,500
100. XYZ Ltd is engaged in production of textile articles. Opening WDV of the block of assets was Rs.` 15, 00,000. During the year, plant was acquired under this block on 15th June 2018 amounting to Rs.` 10, 00,000. One of the asset falling within the block was sold for Rs. ` 5, 50,000 on 14-01- 2019. Rate of depreciation of the block is 15%.
Calculate the total amount of depreciation including additional depreciation available during the previous
year for the block. C