570+ Information systems and engineering economics Solved MCQs

These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Computer Science Engineering (CSE) .

Take a Test

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

discuss

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

discuss

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

discuss

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

discuss

505.	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

discuss

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

discuss

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

discuss

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

discuss

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

discuss

510.	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

discuss

511.	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

discuss

512.	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

discuss

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

discuss

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

discuss

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

discuss

516.	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

discuss

517.	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

discuss

518.	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

discuss

519.	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

discuss

520.	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

discuss

521.	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

discuss

522.	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

discuss

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

discuss

524.	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

discuss

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

discuss

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

discuss

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

discuss

528.	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

discuss

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

discuss

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

discuss

531.	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

discuss

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

discuss

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

discuss

534.	rate is deﬁned as the rate at which the cost general level of goods and services increases resulting in decreases of purchasing
A.	deﬂation
B.	inﬂation
Answer» B. inﬂation

discuss

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

discuss

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

discuss

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

discuss

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

discuss

539.	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.	3.23%
B.	3.33%
C.	5.33%
D.	3.00%
Answer» A. 3.23%

discuss

540.	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.	11.45%
B.	9.00%
C.	8.00%
D.	8.49%
Answer» D. 8.49%

discuss

541.	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

discuss

542.	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.	3.65%
B.	6.1%
C.	3.18%
D.	2.83%
Answer» C. 3.18%

discuss

543.	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

discuss

544.	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%

discuss

545.	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

discuss

546.	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

discuss

547.	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

discuss

548.	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

discuss

549.	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

discuss

550.	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

discuss

570+ Information systems and engineering economics Solved MCQs

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

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

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

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

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

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

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

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.

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?

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?