Engineering Economy Questions and Answers - Set 04

Practice Test: Question Set - 04


1. 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

2. 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

3. 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

4. Which one of the following is included in financial ratios of the firm?
    (A) Profitability ratio
    (B) Liquidity ratio
    (C) Turnover ratio
    (D) All of these

5. Pick up the correct statement from the following:
    (A) The ability of a company to meet obligations which are likely to mature in short term, is called liquidity
    (B) The liquidity ratio may be defined as a relationship of current liabilities and current assets and advances
    (C) The liquidity ratios are used to indicate the financial position of the firm
    (D) All of these

6. Pick up the correct statement from the following:
    (A) The receipts and disbursements in a given time interval are referred to as cash flow
    (B) The assumptions that all cash flows occur at the end of the interest period, is known as the end of period convention
    (C) The cash flow diagram represents the statement of the problem and also includes what is given and what is to be found
    (D) All of the above

7. Pick up the correct statement from the following:
    (A) Engineering economy is a collection of mathematical techniques which simplify economic comparisons
    (B) Engineering economy is a decision assistance tool by which one method will be chosen as the most economically one
    (C) For understanding the engineering economy, one should be able to classify the basic terminology and fundamental concepts of economy
    (D) All of these

8. In the cash flow diagram shown in the given figure
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    (A) The first disbursement occurs at the end of year 2
    (B) The second disbursement occurs at the end of year 4
    (C) The first receipt occurs at the end of year 1
    (D) All of these

9. Which one of the following statements is correct?
    (A) The number of years required to recover the initial cash investment in a project, is called Pay Back period (PBP)
    (B) The discount rate that equates the present value of the expected Net Cash Flows (CFs) with the Initial Cash Outflow (ICO) is known as internal rate of return
    (C) The present value of the proposal's net cash flows, less the proposal's initial cash outflow is known as the Net Present Value (NPV)
    (D) All of these

10. The wages of supervisors and material handlers are charged as:
    (A) Over head
    (B) Direct labour cost
    (C) Indirect labour cost
    (D) None of these

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