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100+ Cash Flow Solved MCQs

in Economics for Engineers

These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Uncategorized topics .

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51.	Risk in Capital budgeting implies that the decision-maker knows___________of the cash flows.
A.	Variability,
B.	Probability,
C.	Certainty,
D.	None of the above
Answer» B. Probability,

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52.	In Certainty-equivalent approach, adjusted cash flows are discounted at:
A.	Accounting Rate of Return,
B.	Internal Rate of Return,
C.	Hurdle Rate,
D.	Risk-free Rate
Answer» D. Risk-free Rate

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53.	Risk in Capital budgeting is same as:
A.	Uncertainty of Cash flows,
B.	Probability of Cash flows,
C.	Certainty of Cash flows,
D.	Variability of Cash flows
Answer» D. Variability of Cash flows

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54.	Which of the following is a risk factor in capital budgeting?
A.	Industry specific risk factors,
B.	Competition risk factors,
C.	Project specific risk factors,
D.	All of the above
Answer» D. All of the above

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55.	In Risk-Adjusted Discount Rate method, the normal rate of discount is:
A.	Increased,
B.	Decreased,
C.	Unchanged,
D.	None of the above
Answer» A. Increased,

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56.	In Risk-Adjusted Discount Rate method, which one is adjusted?
A.	Cash flows,
B.	Life of the proposal,
C.	Rate of discount,
D.	Salvage value
Answer» C. Rate of discount,

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57.	NPV of a proposal, as calculated by RADR real CE Approach will be:
A.	Same,
B.	Unequal,
C.	Both (a) and (b),
D.	None of (a) and (b)
Answer» B. Unequal,

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58.	Risk of a Capital budgeting can be incorporated
A.	Adjusting the Cash flows,
B.	Adjusting the Discount Rate,
C.	Adjusting the life,
D.	All of the above
Answer» D. All of the above

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59.	Which element of the basic NPV equation is adjusted by the RADR?
A.	Denominator,
B.	Numerator,
C.	Both,
D.	None
Answer» A. Denominator,

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60.	In CE Approach, the CE Factors for different years are:
A.	Generally increasing,
B.	Generally decreasing,
C.	Generally same,
D.	None of the above
Answer» B. Generally decreasing,

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61.	Which of the following is correct for RADR?
A.	Accept a project if NPV at RADR is negative,
B.	Accept a project if IRR is more than RADR
C.	RADR is overall cost of capital plus risk-premium ,
D.	All of the above.
Answer» C. RADR is overall cost of capital plus risk-premium ,

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62.	In Playback Period approach to risk the target payback period is
A.	Not adjusted,
B.	Adjusted upward,
C.	Adjusted downward ,
D.	(b) or c
Answer» C. Adjusted downward ,

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63.	In Sensitivity Analysis, the emphasis is on assessment of sensitivity of
A.	Net Economic Life,
B.	Net Present Value,
C.	Both (a) and (b),
D.	None of (a) and (b)
Answer» B. Net Present Value,

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64.	Most Sensitive variable as given by the Sensitivity Analysis should be:
A.	Ignored,
B.	Given Least important,
C.	Given the maximum importance,
D.	None of the above
Answer» C. Given the maximum importance,

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65.	Expected Value of Cashflow, EVCF, is:
A.	Certain to occur,
B.	Most likely Cashflows,
C.	Arithmetic Average Cashflow,
D.	Geometric Average Cashflow
Answer» B. Most likely Cashflows,

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66.	Concept of joint probability is used in case of:
A.	Independent Cashflows,
B.	Uncertain Cashflows,
C.	Dependent Cashflows,
D.	Certain Cashflows
Answer» C. Dependent Cashflows,

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67.	Decision-tree approach is used in:
A.	Proposals with longer life,
B.	Sequential decisions,
C.	Independent Cashflows,
D.	Accept-Reject Proposal
Answer» B. Sequential decisions,

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68.	In a cash flow series:
A.	Uniform gradient signifies that an income or disbursement changes by the same amount in each interest period
B.	Either an increase or decrease in the amount of a cash flow is called the gradient
C.	The gradient in the cash flow may be positive or negative
D.	All of these
Answer» D. All of these

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69.	In a cash-flow diagram:
A.	Time 0 is considered to be the present
B.	Time 1 is considered to be the end of time period 1
C.	A vertical arrow pointing up indicates a positive cash flow
D.	All of these
Answer» D. All of these

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70.	Which method is adopted to develop an approximate or conceptual estimate for perimeter works for buildings from the following?
A.	Base unit method
B.	Cost per function method
C.	Cost per square metre method
D.	Cost per linear metre method
Answer» D. Cost per linear metre method

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71.	Pick up the correct statement from the following:
A.	The ratio of current assets, loans and advances, and the current liquidity is called current ratio
B.	Larger the current ratio, larger is the margin of safety
C.	The operating profit is the difference between gross profit and operating expenses
D.	All of these
Answer» D. All of these

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72.	The ratio of current assets to current liabilities is known as
A.	Liquidity ratio
B.	Current ratio
C.	Acid-Test (or Quick) ratio
D.	Debts ratio
Answer» B. Current ratio

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73.	In the cash-flow diagram shown in the given figure
A.	Equal deposits of Rs 3000 per year (A) are made, starting now
B.	The rate of interest is 10% per year account
C.	The amount accumulated after the seventh deposit is to be computed
D.	All of these
Answer» D. All of these

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74.	The more critical (or severe) test of the firm's liquidity can be judged by:
A.	Liquidity ratio
B.	Current ratio
C.	Acid-Test (or Quick) ratio
D.	Debts ratio
Answer» C. Acid-Test (or Quick) ratio

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75.	If interest is paid more than once in a year, ‘i’ is the rate of interest per year, ‘n’ is the number of periods in years and ‘m’ is a number of periods per years, compound amount factor (CAF) is:
A.	(1 + i/m)n
B.	(1 + i/n)m
C.	(1 + i/n)1/m
D.	(1 + i/m)1/n
Answer» A. (1 + i/m)n

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76.	Pick up the correct reason for making conceptual (or preliminary) estimate from the following:
A.	To have a check on a definitive cost estimate
B.	To check quotations from contractors and/or sub-contractors
C.	To compute target estimate for the owner while drawing and specifications are in initial stage
D.	All of these
Answer» D. All of these

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77.	Pick up the correct method adopted for developing the approximate or conceptual estimates from the following:
A.	Base unit method
B.	Cost per function method
C.	Cost per square metre
D.	All of these
Answer» D. All of these

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78.	Ratio analysis of a construction firm is used for analysis by:
A.	Share holders
B.	Firm's management
C.	Banks of the firm
D.	Financial analysts
Answer» D. Financial analysts

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79.	Current assets less inventories divided by current liabilities is known as
A.	Liquidity ratio
B.	Current ratio
C.	Acid-Test (or Quick) ratio
D.	Debts ratio
Answer» C. Acid-Test (or Quick) ratio

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80.	Refer to the cash flow diagram of uniform gradient in a cash flow (in the given figure), the gradient is:
A.	Rs. 10000 per year
B.	Rs. 15000 per year
C.	Rs. 20000 per year
D.	Rs. 25000 per year
Answer» D. Rs. 25000 per year

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81.	Pick up the correct statement from the following:
A.	The change in the amount of money over a given time period is called 'time value' of money, a most important concept in engineering economy
B.	The manifestation of the time value of money is termed as interest
C.	Interest on borrowing = present amount owed - original loan
D.	All of these
Answer» D. All of these

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82.	Which one of the following questions is relevant to the construction estimates?
A.	Did the estimators precisely evaluate site conditions
B.	Did the estimators use short cut methods which may be unrealistic in their situation
C.	How much money will the contractor's risk, loosing if he were to submit bid on the raw estimate of cost
D.	All of these
Answer» D. All of these

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83.	Both architect and engineer make use of the cost estimate of the project:
A.	For site selection
B.	For designing of the project
C.	For choosing alternatives
D.	All of these
Answer» D. All of these

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84.	Pick up the ratio which gives us sufficient information by which to judge the financial condition and performance of the firm, from the following:
A.	Liquidity ratio
B.	Financial leverage ratio
C.	Activity ratio
D.	None of these
Answer» D. None of these

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85.	The interest calculated on the basis of 365 days a year, is known as:
A.	Interest
B.	Ordinary simple interest
C.	Exact simple interest
D.	None of these
Answer» C. Exact simple interest

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86.	The project contractor relies on the cost of the estimate:
A.	For submission of a competitive bid for a lump-sum contract
B.	For a unit price contract
C.	For preparation of a definitive estimate to help negotiate contract
D.	All of these
Answer» D. All of these

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87.	If a seller recovers his capital along with accumulated compensating interest not in one single lump-sum payment but in periodical equal payments, over time:
A.	Capital Recovery Annuity fs availed
B.	Present work Annuity is availed
C.	Sinking Fund Annuity is availed
D.	Sinking Fund Annuity is availed
Answer» A. Capital Recovery Annuity fs availed

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88.	Pick up the correct statement from the following:
A.	An annuity is a series of equal payments occurring at equal period of time
B.	Annuity is called an equal payment or uniform payment series
C.	An annuity may have periods of time of any length but should always be of equal length
D.	All the above
Answer» D. All the above

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89.	The sunk costs include:
A.	A past expenditure
B.	An unrecovered balance
C.	An invested capital that cannot be retrieved
D.	All of these
Answer» D. All of these

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90.	Pick up the element of the cost from the following:
A.	Direct material
B.	Direct labour
C.	Over head
D.	All of these
Answer» D. All of these

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91.	The ratio obtained by dividing 'quick assets' by current liabilities is called
A.	Turnover ratio
B.	Acid test ratio
C.	Solvency ratio
D.	None of these
Answer» B. Acid test ratio

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92.	The construction estimate of a project is used by:
A.	The owner of the facility
B.	The consulting architect/engineer
C.	The contractor of the project
D.	All of these
Answer» D. All of these

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93.	Pick up the correct statement from the following:
A.	The ratios which show profitability in relation to sales and those which show profitability in relation to investment are called profitability ratios
B.	The ratio of gross profit and net sales is called profitability in relation to sales ratio
C.	The ratio of net profit after taxes to total assets is known as profitability in relation to investment ratio
D.	All of these
Answer» D. All of these

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94.	The product of CAF (S P) and PWF (S P) is:
A.	1/2
B.	1
C.	1/3
D.	¼
Answer» B. 1

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95.	Which one of the following is not a construction estimate?
A.	Initial feasibility estimate
B.	Conceptual preliminary budget
C.	Definite estimate
D.	None of these
Answer» D. None of these

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96.	If ‘P’ is principal amount, ‘I’ is the rate of interest per annum and ‘n’ is the number of periods in years, the compound amount factor (CAF) is:
A.	(1 + i)n
B.	(1 + i)(1/2n)
C.	v(n + i)
D.	None of these
Answer» A. (1 + i)n

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97.	If ‘P’ is principal amount, ‘i’ is the rate of interest and ‘n’ is the number of periods in years, then the interest factor is:
A.	(1 + ni)
B.	(ni - 1)
C.	ni
D.	None of these
Answer» A. (1 + ni)

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98.	Pick up the main purpose of project cost control from the following:
A.	To signal immediate warning of uneconomic operations
B.	To provide a feed back to the estimator
C.	To promote cost consciousness
D.	All of these
Answer» D. All of these

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99.	Pick up the correct statement from the following:
A.	A NPV profile graph shows the curvilinear relationship between the net present value of the project and discount rate employed
B.	In a NPV profile, if discount rate is zero, then net present value is simply total cash inflows less the total cash outflows of the project
C.	As the discount rate increases, the net present value profile slopes downward to the right
D.	All of these
Answer» D. All of these

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100.	If ‘a’ is the base amount expenditure, ‘b’ is the increase in the operation cost each year over a period of’ 'n’ years, the total cost of maintenance is:
A.	a + (n + 1) b
B.	a + (n - 1) b
C.	a × (n - 1) b
D.	a - (n - 1) b
Answer» B. a + (n - 1) b

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100+ Cash Flow Solved MCQs

Risk in Capital budgeting implies that the decision-maker knows___________of the cash flows.

In Certainty-equivalent approach, adjusted cash flows are discounted at:

Risk in Capital budgeting is same as:

Which of the following is a risk factor in capital budgeting?

In Risk-Adjusted Discount Rate method, the normal rate of discount is:

In Risk-Adjusted Discount Rate method, which one is adjusted?

NPV of a proposal, as calculated by RADR real CE Approach will be:

Risk of a Capital budgeting can be incorporated

Which element of the basic NPV equation is adjusted by the RADR?

In CE Approach, the CE Factors for different years are:

Which of the following is correct for RADR?

In Playback Period approach to risk the target payback period is

In Sensitivity Analysis, the emphasis is on assessment of sensitivity of

Most Sensitive variable as given by the Sensitivity Analysis should be:

Expected Value of Cashflow, EVCF, is:

Concept of joint probability is used in case of:

Decision-tree approach is used in:

In a cash flow series:

In a cash-flow diagram:

Which method is adopted to develop an approximate or conceptual estimate for perimeter works for buildings from the following?

Pick up the correct statement from the following:

The ratio of current assets to current liabilities is known as

In the cash-flow diagram shown in the given figure

The more critical (or severe) test of the firm's liquidity can be judged by:

If interest is paid more than once in a year, ‘i’ is the rate of interest per year, ‘n’ is the number of periods in years and ‘m’ is a number of periods per years, compound amount factor (CAF) is:

Pick up the correct reason for making conceptual (or preliminary) estimate from the following:

Pick up the correct method adopted for developing the approximate or conceptual estimates from the following:

Ratio analysis of a construction firm is used for analysis by:

Current assets less inventories divided by current liabilities is known as

Refer to the cash flow diagram of uniform gradient in a cash flow (in the given figure), the gradient is:

Pick up the correct statement from the following:

Which one of the following questions is relevant to the construction estimates?

Both architect and engineer make use of the cost estimate of the project:

Pick up the ratio which gives us sufficient information by which to judge the financial condition and performance of the firm, from the following:

The interest calculated on the basis of 365 days a year, is known as:

The project contractor relies on the cost of the estimate:

If a seller recovers his capital along with accumulated compensating interest not in one single lump-sum payment but in periodical equal payments, over time:

Pick up the correct statement from the following:

The sunk costs include:

Pick up the element of the cost from the following:

The ratio obtained by dividing 'quick assets' by current liabilities is called

The construction estimate of a project is used by:

Pick up the correct statement from the following:

The product of CAF (S P) and PWF (S P) is:

Which one of the following is not a construction estimate?

If ‘P’ is principal amount, ‘I’ is the rate of interest per annum and ‘n’ is the number of periods in years, the compound amount factor (CAF) is:

If ‘P’ is principal amount, ‘i’ is the rate of interest and ‘n’ is the number of periods in years, then the interest factor is:

Pick up the main purpose of project cost control from the following:

Pick up the correct statement from the following:

If ‘a’ is the base amount expenditure, ‘b’ is the increase in the operation cost each year over a period of’ 'n’ years, the total cost of maintenance is: