MCQ Practice Set

1. A project has the following cash flows:

Now One year from now Two years from now Three years from now
–$4 $4 million $4 million –$3 million
million
If the rate is 15 percent, should we proceed with the project?
a. Yes
b. No
c. Cannot tell

2. Sheldon Cooper now has $250,000 in the bank. At the end of each of the next 20 years, he
withdraws $15,000 to pursue his hobbies on comic books and toy trains. He earns 8 percent per
year on his investments. To calculate how much money he will have in 20 years, which of the
following Excel formulae should be used?
a. =FV(8%,20,15000,250000)
b. =FV(8%,20,-15000,250000)
c. =FV(8%,20,15000,-250000)
d. None of the above

3. You deposit $100 in the bank. You want to find out how much it will accumulate to in three
years, if you earn 7% per year. Which of the following Excel formulae should be used?
a. =FV(7%,3,-100,0)
b. =FV(7%,3,0,-100)
c. =FV(7%,3,-100,0,1)
d. None of the above

4. Bernadette and Howard have a quarrel while attending a conference in Seattle. Bernadette
storms into her Mazda Miata and drives 64 miles per hour toward her mother’s home in Los
Angeles. Two hours after Bernadette leaves, Howard jumps into his BMW in hot pursuit, driving
80 miles per hour. To find out how many miles each person will have traveled when Howard
catches Bernadette, we can use Goal Seek in Excel. In this case what cell reference should be used
for the Set Cell in the Goal Seek dialogue box?
a. the reference to the cell containing Howard’s speed
b. the reference to the cell containing the difference of the distances travelled by Howard and
Bernadette
c. the reference to the cell containing Bernadette’s distance covered
d. none of the above

5. A linear optimization problem should be solved using the Simplex LP algorithm. True or False?

6. Optimal value of the objective function tells us the best level of performance we can achieve.
True or False?

7. An NBA player deposits in his bank $15 million at the end of each of the next seven years. He
can earn 6 percent per year on his investments. To find out what is the present value of his future
revenues, which of the following formulae can be used?
a. =FV(6%,7,-15,0,0)
b. =FV(6%,7,0,-15,0)
c. =PV(6%,7,-15,0,0)
d. =PV(6%,7,0,-15,0)
e. None of the above.

8. In 1646, Dumbledore bought the Isle of Drear from the Dwarfs for about 24 wizard dollars in
goods and trinkets. Suppose the Dwarfs had sold the goods and invested the 24 wizard coins at 10
percent. Which of the following Excel functions will you use to determine how much it would be
worth today?
a) =FV(10%,378,0,-24,0)
b) =FV(10%,378,-24,0,0)
c) =FV(10%,1646,0,-24,0)
d) None of the above

9. In a two-way data table, we can observe the effect of the change:

a) of two input variables on one outcome variable
b) of at least two input variables on one outcome variable
c) of at least two input variables on at least one outcome variable
d) of two input variables on at least one outcome variable
e) None of the alternatives

10. The following screenshot of an Excel worksheet gives the quantities of different fruits that
Amish buys. It also provides the price of each type of fruit. For example, Amish buys 5 apples at
Rs 25 per piece, 0.6 kg of grapes at Rs 100 per kg and 8 kiwis at Rs 30 per piece. Which of the
following Excel formula can be used to calculate the total amount Amish had to pay?

i) = SUMPRODUCT(B2:B5,C2:C5)
ii) = B2*C2+B3*C3+B4*C4+B5*C5
iii) = SUMPRODUCT(B2:C2,B3:C3)
iv) = (B2 + B3 + B4 + B5)*(C2 + C3 + C4 + C5)

a) Only (i)
b) Only (ii)
c) Only (iii)
d) Both (i) and (ii)
e) Both (i) and (iv)
11. In the Solver dialogue box, the cell containing the measure of performance or outcome is
referred to as a changing cell. True or False?

12. A local bagel shop produces bagels and croissants. Each bagel requires 6 ounces of flour, 1
gram of yeast, and 2 tablespoons of sugar. A croissant requires 3 ounces of flour, 1 gram of yeast,
and 4 tablespoons of sugar. The company has 6,600 ounces of flour, 1,400 grams of yeast, and
4,800 tablespoons of sugar available for today's baking. Bagel profit is $0.20 each and croissant
profit is $0.30 each. The following screenshot shows the partial spreadsheet model for this
problem.

Which of the following formulae should be written in cell B17?

a. =SUMPRODUCT(C3:D3,C12:D12)
b. =SUMPRODUCT(C7:D7,C12:D12)
c. =SUMPRODUCT(C4:D4,C12:D12)
d. None of the above.

13. Frank and Heidi own a stall at the local park and sell peanuts, popcorn, ice-creams, and cold
drinks. They have developed two proposals to increase profits. The cash flows for these
proposals are:
Proposal Investment Year 1 Year 2 Year 3
today
Add a new -$75000 $44000 $44000 $44000
window
Update existing -$50000 $23000 $23000 $23000
equipment
Assuming a rate of 15%, which of the projects should they opt for?
a. Add a new window
b. Update existing equipment
c. None of the projects
d. Either of the projects

14. Consider a project having the following cash flows shown below. Assuming a 12% rate,
which of the following formulae would you write to calculate the NPV?
Year 1 Year 2 Year 3
 -$60000 $20000 -$15000
a. = NPV(12%,$20000,$15000)-$60000
b. = NPV(12%,$20000,$15000)+$60000
c. = NPV(12%,-$60000,$20000,-$15000)
d. None of the alternatives

15. Old McDonald has just bought a new farm. At the end of each of the next 25 years, he will
have to make payments of $50,000. If the rate is 12 percent per year, which of the following
Excel functions should he use to calculate the present value of these pay ments?
a. =FV(0.12,25,-50000,0,0)
b. =PV(0.12,25,50000,0,0)
c. =PV(0.12,25,0,-50000,0)
d. =PV(0.12,25,-50000,0,0)
e. None of the alternatives

16. To create a horizontal one-way data table, we need to enter the cell reference of the input in
the Data Table dialogue box in the:
a. Column Input Cell
b. Row Input Cell
c. None of the above

17. I presently have $5,000 in the bank. At the beginning of each of the next 10 years, I am going
to invest $1,000 and I expect to earn 10 percent per year on my investments. To calculate how
much money I will have in 10 years, which of the following formula should I use?
a. =FV(0.10,10,-5000,-1000,1)
b. =FV(0.10,10,-1000,-5000,0)
c. =FV(0.10,10,-1000,0,1)
d. =FV(0.10,10,-1000,-5000,1)
e. None of the alternatives

18. Stuart has recently resigned from his job at The Comic Book Store to pursue his dream to be
an artist. To pay the fees for art school, he wants to borrow some money. However, he can
only repay $300 a month. Assuming a repayment period of 5 years and an interest rate of 8 per
cent, which of the following Excel formula can be used to calculate how much he should
borrow?
a. =FV(0.08/12,5*12,-300,0,0)
b. =PV(0.08/12,5*12,0,-300,0)
c. =PV(0.08/12,5*12,-300,0,0)
d. =PV(0.08,5,-300,0,0)
e. =PMT(0.08/12,5*12,-300,0,0)
f. None of the alternatives