590+ Information systems and engineering economics solved MCQs with PDF download

101.	Record date of birth of the resident, indicating day, month and in the relevant ﬁeld.
A.	initial
B.	surname
C.	year
D.	name
Answer» C. year

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102.	has to be recorded by the Enrolment Agency as declared by the enrollee in the box provided by recording Male, Female or Transgender.
A.	date of birth
B.	gender
C.	residential address
D.	fingerprint
Answer» B. gender

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103.	Which of the following is used to retrieve pre-enrolment data?
A.	pre-enrolment id
B.	one time password
C.	resident's name
D.	aadhaar id
Answer» A. pre-enrolment id

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104.	The factors of time and are the deﬁning aspects of any engineering economic decisions
A.	uncertainty
B.	certainty
Answer» A. uncertainty

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105.	Economic decisions differ in a fundamental way from the types of decisions typically encountered in engineering design.
A.	true
B.	false
Answer» A. true

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106.	ENGINEERING ECONOMICS INVOLVES
A.	formulating
B.	estimating
C.	evaluating economic outcomes
D.	all
Answer» D. all

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107.	The factors of time and uncertainty are the deﬁning aspects of any engineering economic decisions
A.	true
B.	false
Answer» A. true

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108.	An instant dollar is worth more than a distant dollar
A.	true
B.	false
Answer» A. true

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109.	engineering economic decision refers to all investment decisions relating to engineering projects.
A.	true
B.	false
Answer» A. true

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110.	engineering economic decision is the evaluation of costs and benef associated with making a capital investment.
A.	true
B.	false
Answer» A. true

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111.	Engineering economics is needed for many kinds of decision making
A.	true
B.	false
Answer» A. true

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112.	The factors of and uncertainty are the deﬁning aspects of any engineering economic decisions
A.	time
B.	investment
Answer» A. time

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113.	Additional risk is not taken without an expected additional return of suitable magnitude
A.	true
B.	false
Answer» A. true

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114.	Money has a time value because it can earn more money over time (earning power).
A.	true
B.	false
Answer» A. true

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115.	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.
A.	true
B.	false
Answer» A. true

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116.	Initial amount of money in transactions involving debt or investments is called the principal (P).
A.	true
B.	false
Answer» A. true

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117.	engineering economic decision is the evaluation of costs and benef associated with making a capital .
A.	expenditure
B.	investment.
Answer» B. investment.

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118.	Initial amount of money in transactions involving debt or investments is called
A.	interest
B.	principal
Answer» B. principal

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119.	How many years would it take an investment to double at 10% annual interest?
A.	7.27 years
B.	8 years
C.	9 years
Answer» A. 7.27 years

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120.	Marginal revenue must exceed marginal cost, in order to carry out a proﬁtable increase of operations
A.	true
B.	false
Answer» A. true

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121.	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
A.	true
B.	false
Answer» A. true

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122.	At 8% interest, what is the equivalent worth of $2,042 after 5 years from now?
A.	5000
B.	4000
C.	2000
D.	3000
Answer» D. 3000

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123.	If you had $2,000 now and invested it at 10%, how much would it be worth in 8 years?
A.	4200
B.	4287
C.	5000
Answer» B. 4287

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124.	Money has a time value because its purchasing power changes over time (inﬂation).
A.	true
B.	false
Answer» A. true

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125.	Interest is the cost of moneyas a cost to the borrower and an earning to the lender
A.	true
B.	false
Answer» A. true

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126.	Cash Flow is the movement of money (in or out) of a project
A.	true
B.	false
Answer» A. true

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127.	the practice of charging an interest rate to an initial sum and to any previously accumulated interest that has not been withdrawn.
A.	compound interest
B.	simple interest
Answer» A. compound interest

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128.	Given P = $1,000 , i = 8% and N = 3 years calculate future value using Compound interest
A.	1200
B.	1259.71
Answer» B. 1259.71

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129.	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
A.	1200
B.	1259.71
C.	2600
D.	none
Answer» C. 2600

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130.	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.
A.	true
B.	false
Answer» A. true

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131.	If you deposit P dollars today for N periods at i, you will have F dollars at the end of period N.
A.	true
B.	false
Answer» A. true

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132.	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?
A.	5000
B.	6663
C.	8000
Answer» B. 6663

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133.	A fund accumulated by periodic deposits and reserved exclusively for a speciﬁc purpose, such as retirement of a debt
A.	sinking fund
B.	principal
C.	interest
Answer» A. sinking fund

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134.	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
A.	true
B.	false
Answer» A. true

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135.	the practice of charging an interest rate only to an initial sum (principal amount) is
A.	compound interest
B.	simple interest
Answer» B. simple interest

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136.	Suppose that you invest $1 for 1 year at 18% compounded monthly. How much interest would you earn?
A.	19.56 % compounded annu
B.	18.56 % compounded a
C.	20.56 % compounded annually
Answer» A. 19.56 % compounded annu

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137.	Effective Interest Rate is Actual interest earned or paid in a year or some other time period
A.	true
B.	false
Answer» A. true

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138.	Suppose that you invest $1 for 1 year at 18% compounded monthly. How much interest would you earn?
A.	19.56 % compounded annu
B.	18% compounded mon
C.	1.5% per month for 12
D.	all true
Answer» D. all true

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139.	Nominal Interest Rate is Interest rate quoted based on an annual period
A.	true
B.	false
Answer» A. true

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140.	The annual equivalent worth (AE) criterion provides a basis for measuring investment worth by determining equal payments on an annual basis.
A.	true
B.	false
Answer» A. true

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141.	When only costs are involved, the AE method is sometimes called the annual equivalent cost method.
A.	true
B.	false
Answer» A. true

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142.	In AE analysis revenues must cover two kinds of costs:– Operating costs and Capital recovery costs
A.	true
B.	false
Answer» A. true

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143.	Operating costs are incurred by the operation of physical plants or equipment needed to provide service
A.	true
B.	false
Answer» A. true

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144.	Capital recovery costs are incurred by purchasing assets to be used in production and service.
A.	true
B.	false
Answer» A. true

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145.	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.)
A.	-220.76
B.	-200
C.	-240
Answer» A. -220.76

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146.	Inﬂation is a loss in the purchasing power of money over time.
A.	true
B.	false
Answer» A. true

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147.	is a loss in the purchasing power of money over time.
A.	inﬂation
B.	deﬂation
Answer» A. inﬂation

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148.	The same dollar amount buys less of an item over time is
A.	inﬂation
B.	deﬂation
Answer» A. inﬂation

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149.	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
A.	true
B.	false
Answer» A. true

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150.	CPI does not take into the account the price of raw material, ﬁnished product and operating cost
A.	true
B.	false
Answer» A. true

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151.	PPI measures average change over a time in selling prices by domestic producers of goods and services.
A.	true
B.	false
Answer» A. true

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152.	Inﬂation rate is deﬁned as the rate at which the cost general level of goods and services increases resulting in decreases of purchasing
A.	true
B.	false
Answer» A. true

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153.	Actual (current) dollars (An)is the dollar value that is “inﬂuenced” by inﬂation.
A.	true
B.	false
Answer» A. true

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154.	Actual (current) dollars (An)is the dollar value that is “inﬂuenced” by .
A.	deﬂation
B.	inﬂation
Answer» B. inﬂation

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155.	dollars is the dollar value that is “inﬂuenced” by inﬂation.
A.	actual
B.	constant
Answer» A. actual

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156.	Constant (real) dollars reﬂect constant purchasing power independent of the passage of time
A.	true
B.	false
Answer» A. true

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157.	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?
A.	0.0323
B.	0.0333
C.	0.0533
D.	0.03
Answer» A. 0.0323

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158.	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?
A.	0.1145
B.	0.09
C.	0.08
D.	0.0849
Answer» D. 0.0849

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159.	If you experience a 6 % annual inﬂation, how long does it take to see the purchasing power being reduced in half?
A.	13 years
B.	10 years
C.	12 years
D.	11years
Answer» C. 12 years

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160.	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?
A.	0.0365
B.	0.061
C.	0.0318
D.	0.0283
Answer» C. 0.0318

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161.	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%.
A.	34980
B.	38727
C.	72534
D.	40276
Answer» C. 72534

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162.	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?
A.	about 9.5%
B.	about 13.26%
C.	about 9.26%
D.	about 8.9%
Answer» D. about 8.9%

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163.	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?
A.	361.91
B.	383.66
C.	444.89
D.	396.02
Answer» B. 383.66

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164.	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)?
A.	11945
B.	11838
C.	12538
D.	12142
Answer» B. 11838

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165.	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?
A.	6 years
B.	0 year
C.	11 year
D.	8 year
Answer» D. 8 year

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166.	Which of the following statements is incorrect?
A.	the simplicity of the payback period method is one of its most appealing qualities even though it fails to measure project proﬁtability.
B.	if two investors are considering the same project, the payback period will be longer for the investor with the higher marr.
C.	considering the cost of funds in a payback calculation is equivalent to ﬁnding the time period when the project balance becomes zero.
D.	if you were to consider the cost of funds in a payback period calculation, you would have to wait longer to breakeven as you increase the interest rate.
Answer» B. if two investors are considering the same project, the payback period will be longer for the investor with the higher marr.

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167.	Find the net present worth of the following cash ﬂow series at an interest rate of 10%
A.	$550 < pw(10%) ≤ $600
B.	$600 < pw(10%) ≤ $650
C.	$500 < pw(10%) ≤ $550
D.	$650 < pw(10%) ≤ $700
Answer» B. $600 < pw(10%) ≤ $650

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168.	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?
A.	250100
B.	232316
C.	201205
D.	218420
Answer» D. 218420

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169.	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?
A.	2887776
B.	2766344
C.	2047734
D.	2507621
Answer» C. 2047734

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170.	Find the capitalized equivalent worth for the project cash ﬂow series at an interest rate of 10%.
A.	ce(10%) ⇓ = ⇓ $1,753
B.	ce(10%) ⇓ = ⇓ $1,548
C.	ce(10%) ⇓ = ⇓ $1,500
D.	ce(10%) ⇓ = ⇓ $1,476
Answer» B. ce(10%) ⇓ = ⇓ $1,548

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171.	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?
A.	the net present worth of the project at 10% interest is $1,242
B.	the required additional investment at the end of period 1 is $500
C.	the net future of the project at 10% interest is $2,000
D.	within 2 years, the company will recover all its investments and the cost of funds (interest) from the project
Answer» B. the required additional investment at the end of period 1 is $500

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172.	Reconsider the project balance table calculated at 10% given in 5.9.:Which of the following statements is correct?
A.	the cash ﬂow in period 3 is $240
B.	the project is not proﬁtable at i ⇓ = ⇓ 10%.
C.	the conventional payback period is 1.7 years
D.	the net present worth of the project is $2,000
Answer» A. the cash ﬂow in period 3 is $240

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173.	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.
A.	3579806
B.	3877482
C.	4301205
D.	3360343
Answer» B. 3877482

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174.	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%?
A.	850
B.	700
C.	750
D.	800
Answer» C. 750

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175.	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%.
A.	$524 million
B.	$105 million
C.	$420 million
D.	$494 million
Answer» A. $524 million

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176.	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.)
A.	135928
B.	132275
C.	114487
D.	72275
Answer» B. 132275

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177.	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%
A.	project e1
B.	indifferent
C.	cannot compare without knowing the year-end salvage values over their service lives
D.	project e2
Answer» D. project e2

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178.	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.
A.	35867
B.	81000
C.	82445
D.	66099
Answer» D. 66099

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179.	Find the annual equivalent worth for the following inﬁnite cash ﬂow series at an interest rate of 10%:
A.	461.2
B.	445.2
C.	985.4
D.	438.6
Answer» D. 438.6

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180.	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?
A.	12000
B.	9000
C.	10000
D.	11000
Answer» C. 10000

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181.	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?
A.	8.79
B.	7.85
C.	11.85
D.	5.89
Answer» A. 8.79

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182.	The following inﬁnite cash ﬂow series has a rate of return of 10%. Determine the unknown value of X.
A.	120
B.	100
C.	82
D.	90
Answer» D. 90

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183.	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?
A.	82000
B.	90000
C.	64000
D.	60000
Answer» C. 64000

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184.	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
A.	0.1
B.	0.15
C.	0.2
D.	0.3
Answer» B. 0.15

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185.	For an employee in receipt of hostel expenditure allowance for his three children, the maximum annual allowance exempt under section 10(14) is
A.	rs.10, 800
B.	rs.7,200
C.	rs.9,600
D.	rs.3,600
Answer» B. rs.7,200

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186.	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
A.	rs.75,000
B.	rs.1,50,000
C.	rs.1,00,000
D.	none of the above
Answer» C. rs.1,00,000

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187.	A.O.P should consist of :
A.	individual only
B.	persons other thanindividual only
C.	both the above
D.	none of the above
Answer» C. both the above

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188.	Body of individual should consist of :
A.	individual only
B.	persons other thanindividual only
C.	both the above
D.	none of the above
Answer» A. individual only

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189.	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:
A.	15-11-2008 to 31-3-2009
B.	1-12-2008 to 31-3-2009
C.	2008-2009
D.	none of the above
Answer» A. 15-11-2008 to 31-3-2009

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190.	A person leaves India permanently on 15-11-2008.The assessment year for income earned till 15-11-2008 in this case shall be:
A.	2007-08
B.	2008-09
C.	2009-10
D.	none of the above
Answer» B. 2008-09

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191.	As per section 30, which expenditure incurred for a building used for the business or profession shall not be allowed as deduction?
A.	rent, rates and taxes
B.	insurance of building
C.	repairs of building
D.	capital expenditure
Answer» D. capital expenditure

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192.	Group of assets falling within a class of assets comprising of tangible & intangible assets is known as :
A.	group of assets
B.	block of assets
C.	set of assets
D.	none of these
Answer» B. block of assets

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193.	Depreciation available, if the asset is used for less than 180 days during the year of acquisition shall be of block rate:
A.	50%
B.	20%
C.	100%
D.	15%
Answer» A. 50%

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194.	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?
A.	7.5%
B.	15%
C.	20
D.	10%
Answer» A. 7.5%

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195.	If the machinery is purchased on 4th October, 2018 then at what rate depreciation will be provided on it?
A.	60%
B.	7.5%
C.	15%
D.	10%
Answer» B. 7.5%

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196.	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 :
A.	lump sum sale
B.	slump sale
C.	aggregate sale
D.	total sale
Answer» B. slump sale

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197.	Rate of depreciation chargeable on fully temporary wooden structure for the assessment year 2019-20 is
A.	5%
B.	10%
C.	100%
D.	40%
Answer» D. 40%

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198.	Rate of depreciation chargeable on temporary wooden structure for the assessment year 2019- 20 is - A. 40% B. 10% C. 100% D. 50%.
A.	40%
B.	10%
C.	100%
D.	50%
Answer» A. 40%

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199.	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 -
A.	rs.1,50,000
B.	rs.75,000
C.	rs.37,500
D.	rs.1,21,500
Answer» C. rs.37,500

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200.	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
A.	rs.` 2,92,500
B.	rs.`4,92,500
C.	rs.` 3,92,500 88
D.	rs.` 3,52,500
Answer» B. rs.`4,92,500

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Information systems and engineering economics Solved MCQs

Record date of birth of the resident, indicating day, month and in the relevant ﬁeld.

has to be recorded by the Enrolment Agency as declared by the enrollee in the box provided by recording Male, Female or Transgender.

Which of the following is used to retrieve pre-enrolment data?

The factors of time and are the deﬁning aspects of any engineering economic decisions

Economic decisions differ in a fundamental way from the types of decisions typically encountered in engineering design.

ENGINEERING ECONOMICS INVOLVES

The factors of time and uncertainty are the deﬁning aspects of any engineering economic decisions

An instant dollar is worth more than a distant dollar

engineering economic decision refers to all investment decisions relating to engineering projects.

engineering economic decision is the evaluation of costs and benef associated with making a capital investment.

Engineering economics is needed for many kinds of decision making

The factors of and uncertainty are the deﬁning aspects of any engineering economic decisions

Additional risk is not taken without an expected additional return of suitable magnitude

Money has a time value because it can earn more money over time (earning power).

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.

Initial amount of money in transactions involving debt or investments is called the principal (P).

engineering economic decision is the evaluation of costs and benef associated with making a capital .

Initial amount of money in transactions involving debt or investments is called

How many years would it take an investment to double at 10% annual interest?

Marginal revenue must exceed marginal cost, in order to carry out a proﬁtable increase of operations

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

At 8% interest, what is the equivalent worth of $2,042 after 5 years from now?

If you had $2,000 now and invested it at 10%, how much would it be worth in 8 years?

Money has a time value because its purchasing power changes over time (inﬂation).

Interest is the cost of moneyas a cost to the borrower and an earning to the lender

Cash Flow is the movement of money (in or out) of a project

the practice of charging an interest rate to an initial sum and to any previously accumulated interest that has not been withdrawn.

Given P = $1,000 , i = 8% and N = 3 years calculate future value using Compound interest

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

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.

If you deposit P dollars today for N periods at i, you will have F dollars at the end of period N.

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?

A fund accumulated by periodic deposits and reserved exclusively for a speciﬁc purpose, such as retirement of a debt

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

the practice of charging an interest rate only to an initial sum (principal amount) is

Suppose that you invest $1 for 1 year at 18% compounded monthly. How much interest would you earn?

Effective Interest Rate is Actual interest earned or paid in a year or some other time period

Suppose that you invest $1 for 1 year at 18% compounded monthly. How much interest would you earn?

Nominal Interest Rate is Interest rate quoted based on an annual period

The annual equivalent worth (AE) criterion provides a basis for measuring investment worth by determining equal payments on an annual basis.

When only costs are involved, the AE method is sometimes called the annual equivalent cost method.

In AE analysis revenues must cover two kinds of costs:– Operating costs and Capital recovery costs

Operating costs are incurred by the operation of physical plants or equipment needed to provide service

Capital recovery costs are incurred by purchasing assets to be used in production and service.

Inﬂation is a loss in the purchasing power of money over time.

is a loss in the purchasing power of money over time.

The same dollar amount buys less of an item over time is

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

CPI does not take into the account the price of raw material, ﬁnished product and operating cost

PPI measures average change over a time in selling prices by domestic producers of goods and services.

Inﬂation rate is deﬁned as the rate at which the cost general level of goods and services increases resulting in decreases of purchasing

Actual (current) dollars (An)is the dollar value that is “inﬂuenced” by inﬂation.

Actual (current) dollars (An)is the dollar value that is “inﬂuenced” by .

dollars is the dollar value that is “inﬂuenced” by inﬂation.

Constant (real) dollars reﬂect constant purchasing power independent of the passage of time

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?

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?

If you experience a 6 % annual inﬂation, how long does it take to see the purchasing power being reduced in half?

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?

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%.

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?

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?

Which of the following statements is incorrect?

Find the net present worth of the following cash ﬂow series at an interest rate of 10%

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?

Find the capitalized equivalent worth for the project cash ﬂow series at an interest rate of 10%.

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?

Reconsider the project balance table calculated at 10% given in 5.9.:Which of the following statements is correct?

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%

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.

Find the annual equivalent worth for the following inﬁnite cash ﬂow series at an interest rate of 10%:

The following inﬁnite cash ﬂow series has a rate of return of 10%. Determine the unknown value of X.

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?

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

For an employee in receipt of hostel expenditure allowance for his three children, the maximum annual allowance exempt under section 10(14) is

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

A.O.P should consist of :

Body of individual should consist of :

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:

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?