MCQ - Unit 3
MCQ - Unit 3
MCQ - Unit 3
Cash flow
1. Cash flow statement is prepared for financial planning of
a) Long range
b) Medium range
c) Short range
d) Very Long range
8. Mention the net amount of ‘Source’ or ‘Use’ of cash when a fixed asset having
book value of ₹15,000 is sold at a loss of ₹5,000.
a) Use ₹5,000
b) Source ₹10,000
c) Use ₹15,000
d) Source ₹15,000
12. A loan of Rs.5,000 is made for a period of 15 months, at a simple interest rate
of 15%, what future amount is due at the end of the loan period?
a) 5,937.50
b) 5,873.20
c) 5,712.40
d) 5,690.12
Prepared by
Prof. G. Gnanakumar, Asst. Professor / Mechanical,
Panimalar Institute of Technology, Chennai
13. A man invested Rs.110,000 for 31 days. The net interest after deducting 20%
withholding tax is Rs.890.36. Find the rate of return annually.
a) 11.50 %
b) 11.75 %
c) 11.95 %
d) 12.32 %
14. The exact simple interest of P5,000 invested from June 21, 1995 to December
25, 1995 is P100. What is the rate of interest?
a) 3.90 %
b) 3.92 %
c) 3.95 %
d) 3.98 %
15. What is the ordinary interest on Rs.1,500.50 for 182 days at 5.2%?
a) Rs.39.01
b) Rs.39.82
c) Rs.39.45
d) Rs.39.99
16. What is the present worth of a Rs.500 annuity starting at the end of the third
year and continuing to the end of the fourth year, if the annual interest rate
is 10 %?
a) Rs. 727.17
b) Rs. 717.17
c) Rs. 714.71
d) Rs. 731.17
17. A man loans Rs. 87,400 from a bank with interest at 5% compounded
annually. He agrees to pay his obligations by paying 8 equal annual
payments, the first being due at the end of 10 years. Find the annual
payments.
a) Rs. 43,600.10
b) Rs. 43,489.47
c) Rs. 43,263.91
d) Rs. 43,763.20
18. The alternatives which are standalone solutions for given situations in
engineering involve:
a) a purchase cost (first cost)
b) the anticipated life of the asset
Prepared by
Prof. G. Gnanakumar, Asst. Professor / Mechanical,
Panimalar Institute of Technology, Chennai
c) the yearly costs of maintaining the asset (annual maintenance and operating
cost)
d) the anticipated resaleable value (salvage value) and the interest return (rate of
return)
e) All of these
19. Refer to the cash flow diagram of uniform gradient in a cash flow (in the given
figure), the gradient is
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
21. 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 x (n - 1) b
Prepared by
Prof. G. Gnanakumar, Asst. Professor / Mechanical,
Panimalar Institute of Technology, Chennai
d) a - (n - 1) b
22. 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:
𝒊 𝒏
a) (𝟏 + 𝒎)
𝑖 𝑚
b) (1 + )
𝑛
1⁄
𝑖 𝑚
c) (1 + )
𝑛
1⁄
𝑖 𝑛
d) (1 + 𝑚)
24. If ‘S’ is the future capital accumulated in ‘n’ years at the rate of interest ‘𝒊’ per
annum, then present worth is
𝑺
a) (𝟏+𝒊)𝒏
b) 𝑆(1 + 𝑖)𝑛
1
c) 𝑆(1 + 𝑖) ⁄𝑛
d) None of these
26. The CRF (ep) is also known as: [CRF(EP) - 8% - 7], where
a) 8% is the rate of interest per year
b) money is borrowed for n = 7 years
c) both (a) and (b)
d) Neither (a) nor (b)
28. If you borrowed money from your friend with simple interest of 12%, find the
present worth of Rs.50,000 which is due at the end of 7months.
a) Rs.46,200
b) Rs.46,729
c) Rs.44,893
d) Rs.45,789
29. A machine has been purchased and installed at a total cost of Rs.18,000.00.
The machine will be retired at the end of 5 years, at which time it is expected
to have a scrap value of Rs.2,000.00 based on current prices. The machine
will then be replaced with an exact duplicate. The company plans to establish
a reserve fund to accumulate the capital needed to replace the machine. If
an average annual rate of inflation of 3% is anticipated, how much capital
must be accumulated?
a) Rs.15,030.00
b) Rs.12,382.00
c) Rs.18,548.39
d) Rs.15,386.00
31. The type of annuity where the first payment is made after several periods,
after the beginning of the payment.
a) Perpetuity
b) Ordinary annuity
c) Annuity due
d) Deferred annuity
32. The difference between the present value and the worth of money at some
time in the future is called
a) Market value
Prepared by
Prof. G. Gnanakumar, Asst. Professor / Mechanical,
Panimalar Institute of Technology, Chennai
b) Net value
c) Discount
d) Interest
33. Find the present worth of a future payment of Rs.80,000 to be made in six
years with an interest of 12% compounded annually.
a) Rs.40,540.49
b) Rs.40,450.49
c) Rs.40,350.49
d) Rs.40,530.49
35. Five years ago, you paid Rs.34,000 for a residential lot. Today you sell it at
Rs.50,000. What is your annual rate of appreciation?
a) 8.12%
b) 8.00%
c) 7.92%
d) 8.32%
36. Mr. Raman has Rs.13,760 in cash and he would like to invest it in business.
His estimates of the year-by-year receipts and disbursements for all
purposes are shown in the tabulation below:
Year Receipt Disbursement
0 0 −Rs.13,760
4 Rs.5,000 +Rs.1,000
5 Rs.6,200 +Rs.1,200
6 Rs.7,500 +Rs.1,500
7 Rs.8,800 +Rs.1,800
He estimates that his equipment will have a salvage value of Rs.2,000 at the end
of useful life. Find the rate of return of the prospective equipment.
a) 10.11%
b) 11.80%
c) 11.10%
d) 10.51%
Prepared by
Prof. G. Gnanakumar, Asst. Professor / Mechanical,
Panimalar Institute of Technology, Chennai
37. Find the annual payment to extinguish a debt of Rs.10,000 payable for 6 years
at 12% interest annually.
a) Rs.2,324.62
b) Rs.2,234.26
c) Rs.2,432.26
d) Rs.2,342.26
38. A factory operator bought a diesel generator set for Rs.10,000.00 and agreed
to pay the dealer uniform sum at the end of each year for 5 years at 8%
interest compounded annually, that the final payment will cancel the debt for
principal and interest. What is the annual payment?
a) Rs.2,500.57
b) Rs.2,544.45
c) Rs.2,540.56
d) Rs.2,504.57
39. A piece of machinery can be bought for Rs.10,000 cash or for Rs.2,000 down
and payments of Rs.750 per year for 15 years. What is the annual interest
rate for the time payments?
a) 4.61%
b) 4.71%
c) 4.41%
d) 4.51%
41. A small machine has an initial cost of Rs.20,000, a salvage value of Rs.2,000
and a life of 10 years. If your cost of operation per year is Rs.3,500 and your
revenues per year is Rs.9,000, what is the approximate rate of return (ROR)
on the investment?
a) 24.2%
b) 24.8%
c) 25.1%
d) 25.4%
Prepared by
Prof. G. Gnanakumar, Asst. Professor / Mechanical,
Panimalar Institute of Technology, Chennai
42. The formula for the present worth of the cash flow diagram is computed as
follows:
43. Investment proposals A and B have the net cash flows as follows:
End of Years (𝑖 = 18%)
Proposal
0 1 2 3 4
A (Rs.) −10,000 3,000 3,000 7,000 6,000
B (Rs.) −10,000 6,000 6,000 3,000 3,000
44. From the data Q. No. 43, The present worth value of B is
a) 2667.40
b) 2766.40
c) 2776.40
d) 2767.40
45. A small business with an initial outlay of Rs. 12,000 yields Rs. 10,000 during
the first year of its operation and the yield increases by Rs. 1,000 from its
second year of operation up to its 10th year of operation. At the end of the
life of the business, the salvage value is zero. Find the present worth of the
business by assuming an interest rate of 18%, compounded annually.
a) 42793.56
b) 49273.36
c) 47293.36
d) 43729.46
Prepared by
Prof. G. Gnanakumar, Asst. Professor / Mechanical,
Panimalar Institute of Technology, Chennai
46. A man owns a corner plot. He must decide which of the several alternatives
to select in trying to obtain a desirable return on his investment. After much
study and calculation, he decides that the two best alternatives are as given
in the following table:
47. From the data available in Q .no 46, The future worth value of Build soft ice
cream stand is computed as
a) Rs. 2,50,77,360
b) Rs. 2,50,47,560
c) Rs. 2,50,77,560
d) Rs. 2,50,57,560
Prepared by
Prof. G. Gnanakumar, Asst. Professor / Mechanical,
Panimalar Institute of Technology, Chennai
49. The data for the manufacturer of advance machining centre are listed below
Down payment, P = Rs. 5,00,000
Yearly equal installment, A = Rs. 2,00,000
n = 15 years
i = 20%, compounded annually
The cash flow diagram for manufacturer
The annual equivalent cost expression of the above cash flow diagram is
a) Rs. 3,09,650
b) Rs. 3,90,950
c) Rs. 3,06,950
d) Rs. 3,60,950
50. A company is trying to diversify its business in a new product line. The life
of the project is 10 years with no salvage value at the end of its life. The initial
outlay of the project is Rs. 20,00,000. The annual net profit is Rs. 3,50,000.
Find the rate of return for the new business.
a) 10.24%
b) 11.74%
c) 12.74%
d) 11.44%
Prepared by
Prof. G. Gnanakumar, Asst. Professor / Mechanical,
Panimalar Institute of Technology, Chennai