FE-type Sample Questions for PEEA 5e Chapter 1

Transcription

1 FE-type Sample Questions for PEEA 5e Chapter 1 Chapter 1 1. The fact that one should not add or subtract money unless it occurs at the same point in time is an illustration of what concept? (a) time value of money (b) marginal return (c) economy of scale (d) Pareto principle 2. If a set of investment alternatives contains all possible choices that can be made, then the set is said to be which of the following? (a) coherent (b) collectively exhaustive (c) independent (d) mutually exclusive 3. Which of the following examples does not illustrate a cash flow approach? (a) a payroll manager writes a check to pay a shop worker (b) a neighbor pays $0.25 to buy a glass of lemonade at a lemonade stand (c) a hungry teenager pays for snacks with a debit card (d) a building contractor buys lumber on account at a local lumber yard 4. The discounting in a discounted cash flow approach requires the use of which of the following? (a) an interest rate (b) the economic value added (c) the gross margin (d) the incremental cost

2 5. Risks and returns are generally correlated. (a) inversely (b) negatively (c) not (d) positively 6. Assuming zero incremental costs for the do nothing alternative is generally (a) appropriate (b) risky (c) optimistic (d) realistic 7. Answering what if questions with respect to an economic analysis is an example of which step in the Systematic Economic Analysis Technique? (a) identifying the investment alternatives (b) defining the planning horizon (c) comparing the alternatives (d) performing supplementary analysis 8. Which of the following is useful in making a final selection when multiple criteria exist? (a) four discounted cash flow rules (b) seven step systematic analysis technique (c) ten principles of engineering economic analysis (d) weighted factor comparison method

3 9. Time value of money calculations may not be required in an economic evaluation for all of the following reasons except (a) annual cash flows are proportional to the first year cash flow (b) inflation is absent (c) no investment of capital is required (d) no differences in the cash flows of the alternatives after the first year 10. If a student s time value of money rate is 30 percent, then the student would be indifferent between $100 today and how much in one year? (a) $30 (b) $100 (c) $103 (d) $ A bottled mango juice drink must contain at least 17.0% mango juice for proper taste. The drink is created by blending unprocessed juice from two orchards. RightRipe Orchard sells unprocessed mango juice that is 12.5% mango juice and 87.5% base liquids. PureBlend Orchard sells unprocessed juice that is 20.0% mango juice and 80.0% base. What percentage of unprocessed juice from each orchard is required to exactly meet the 17.0% specification? (a) 40% RightRipe; 60% PureBlend (b) 50% RightRipe; 50% PureBlend (c) 60% RightRipe; 50% PureBlend (d) Can not be determined from the information given

4 12. A printed circuit board is produced by passing through a sequence of three steps. The scrap rates for steps one through three are 5%, 3%, and 3%, respectively. If 10,000 good parts are needed, the number that should be started at step one is closest to which of the following? (a) 11,100 (b) 11,140 (c) 11,190 (d) 11, Reconsider the preceding problem assuming that the sequence can be rearranged such that the processing step with the 5% scrap rate occurs last rather than first. Using this redesigned sequence, the number of parts that should be started will (a) Increase (b) Decrease (c) Be unchanged (d) Cannot be determined from the information given

5 FE-type Sample Questions for PEEA 5e Chapter 2 Chapter 2 1. A deposit of $3,000 is made in a savings account that pays 7.5% interest compounded annually. How much money will be available to the depositor at the end of 16 years? (a) $8,877 (b) $10,258 (c) $9,542 (d) $ The plan was to leave $5,000 on deposit in a savings account for 15 years at 6.5% interest compounded annually. It became necessary to withdraw $1,500 at the end of the 5th year. How much will be on deposit at the end of the 15 year period? (a) $11,359 (b) $9,359 (c) $12,043 (d) $10, A child receives $100,000 as a gift which is deposited in a 6% bank account compounded semiannually. If $5,000 is withdrawn at the end of each half year, how long will the money last? (a) 21.0 years (b) 15.5 years (c) 25.0 years (d) 18.0 years

6 4. Your company seeks to take over Good Deal Company. Your company s offer for Good Deal is for $3,000,000 in cash upon signing the agreement followed by 10 annual payments of $300,000 starting one year later. The time value of money is 10%. What is the present worth your company s offer? (a) $3,000,000 (b) $2,281,830 (c) $4,843,380 (d) $5,281, If you want to triple your money at an interest rate of 6% per year compounded annually, for how many years would you have to leave the money in the account? (a) 12 years (b) 19 years (c) 32 years (d) cannot be determined without knowing the amount invested. 6. Let F be the accumulated sum, P the principal invested, i the annual compound interest rate, and n the number of years. Which of the following correctly relates these quantities? (a) F = P (1 + in) (b) F = P (1 + i) n (c) F = P (1 + n) i (d) F = P (1 + ni) n-1 7. The maintenance costs of a car increase by $200 each year. This cash flow pattern is best described by which of the following? (a) gradient series (b) geometric series (c) infinite series (d) uniform series