McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Computer Science Engineering (CSE) .
| 351. |
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 | |
| 352. |
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 | |
| 353. |
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 | |
| 354. |
Given: F = $100,000, N = 8 years, and i = 7% Find: A |
| A. | 9999 |
| B. | 9746.78 |
| C. | 9700 |
| Answer» B. 9746.78 | |
| 355. |
Suppose that you invest $1 for 1 year at 18% compounded monthly. How much interest would you earn? |
| A. | 19.56 % compounded annually |
| B. | 18.56 % compounded annually |
| C. | 20.56 % compounded annually |
| Answer» A. 19.56 % compounded annually | |
| 356. |
Given: F = $5,000, N = 5 years, and i = 7% , Find: A |
| A. | 9999 |
| B. | 9746.78 |
| C. | 9700 |
| D. | 869.7 |
| Answer» D. 869.7 | |
| 357. |
Effective Interest Rate is Actual interest earned or paid in a year or some other time period |
| A. | true |
| B. | false |
| Answer» A. true | |
| 358. |
Suppose that you invest $1 for 1 year at 18% compounded monthly. How much interest would you earn? |
| A. | 19.56 % compounded annually |
| B. | 18% compounded monthly |
| C. | 1.5% per month for 12 months |
| D. | all true |
| Answer» D. all true | |
| 359. |
Nominal Interest Rate is Interest rate quoted based on an annual period |
| A. | true |
| B. | false |
| Answer» A. true | |
| 360. |
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 | |
| 361. |
When only costs are involved, the AE method is sometimes called the annual equivalent cost method. |
| A. | true |
| B. | false |
| Answer» A. true | |
| 362. |
In AE analysis revenues must cover two kinds of costs:– Operating costs and Capital recovery costs |
| A. | true |
| B. | false |
| Answer» A. true | |
| 363. |
Operating costs are incurred by the operation of physical plants or equipment needed to provide service |
| A. | true |
| B. | false |
| Answer» A. true | |
| 364. |
Capital recovery costs are incurred by purchasing assets to be used in production and service. |
| A. | true |
| B. | false |
| Answer» A. true | |
| 365. |
_______________ are incurred by purchasing assets to be used in production and service. |
| A. | operating costs |
| B. | capital recovery costs |
| Answer» B. capital recovery costs | |
| 366. |
____________ are incurred by the operation of physical plants or equipment needed to provide service |
| A. | operating costs |
| B. | capital recovery costs |
| Answer» A. operating costs | |
| 367. |
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 | |
| 368. |
Inflation is a loss in the purchasing power of money over time. |
| A. | true |
| B. | false |
| Answer» A. true | |
| 369. |
____________ is a loss in the purchasing power of money over time. |
| A. | inflation |
| B. | deflation |
| Answer» A. inflation | |
| 370. |
The same dollar amount buys less of an item over time is ____________ |
| A. | inflation |
| B. | deflation |
| Answer» A. inflation | |
| 371. |
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 | |
| 372. |
CPI does not take into the account the price of raw material, finished product and operating cost |
| A. | true |
| B. | false |
| Answer» A. true | |
| 373. |
PPI measures average change over a time in selling prices by domestic producers of goods and services. |
| A. | true |
| B. | false |
| Answer» A. true | |
| 374. |
Inflation rate is defined as the rate at which the cost general level of goods and services increases resulting in decreases of purchasing power of goods and services. |
| A. | true |
| B. | false |
| Answer» A. true | |
| 375. |
_________ rate is defined as the rate at which the cost general level of goods and services increases resulting in decreases of purchasing power of goods and services. |
| A. | deflation |
| B. | inflation |
| Answer» B. inflation | |
| 376. |
Actual (current) dollars (An)is the dollar value that is “influenced” by inflation. |
| A. | true |
| B. | false |
| Answer» A. true | |
| 377. |
Actual (current) dollars (An)is the dollar value that is “influenced” by _____________. |
| A. | deflation |
| B. | inflation |
| Answer» B. inflation | |
| 378. |
____ dollars is the dollar value that is “influenced” by inflation. |
| A. | actual |
| B. | constant |
| Answer» A. actual | |
| 379. |
Constant (real) dollars reflect constant purchasing power independent of the passage of time |
| A. | true |
| B. | false |
| Answer» A. true | |
| 380. |
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 | |
| 381. |
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 | |
| 382. |
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 | |
| 383. |
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 | |
| 384. |
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 | |
| 385. |
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% | |
| 386. |
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 | |
| 387. |
A couple wants to save for their daughter’s college expenses. 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 | |
| 388. |
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 | |
| 389. |
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. | |
| 390. |
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 | |
| 391. |
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 | |
| 392. |
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 | |
| 393. |
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 | |
| 394. |
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 | |
| 395. |
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 | |
| 396. |
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 | |
| 397. |
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 | |
| 398. |
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 | |
| 399. |
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 | |
| 400. |
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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