Engineering Economy online Practice Test – Set 02

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Q1. 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


Q2. 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


Q3. 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


Q4. 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


Q5. 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


Q6. The product of CAF (S P) and PWF (S P) is:

(A) 1/2
(B) 1
(C) 1/3
(D) 1/4

Answer:(B) 1


Q7. 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


Q8. 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

Q9. 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


Q10. 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


Q11. 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


Q12. 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) √(n + i)
(D) None of these

Answer: (A) (1 + i)n


Q13. 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


Q14. 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


Q15. 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)


Engineering Economy MCQs all set-

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