MCQs in Engineering Economics Part III

(Last Updated On: December 8, 2017)

MCQs in Engineering Economics Part 3

This is the Multiples Choice Questions Part 3 of the Series in Engineering Economics as one of the General Engineering and Applied Sciences (GEAS) topic. In Preparation for the ECE Board Exam make sure to expose yourself and familiarize in each and every questions compiled here taken from various sources including past Board Questions in General Engineering and Applied Sciences (GEAS), Engineering Economy Books, Journals and other Engineering Economy References.

Online Questions and Answers in Engineering Economics Series

Following is the list of multiple choice questions in this brand new series:

Engineering Economics MCQs
PART 1: MCQs from Number 1 – 50                        Answer key: PART I
PART 2: MCQs from Number 51 – 100                   Answer key: PART II
PART 3: MCQs from Number 101 – 150                 Answer key: PART III
PART 4: MCQs from Number 151 – 200                 Answer key: PART IV
PART 5: MCQs from Number 201 – 250                 Answer key: PART V
PART 6: MCQs from Number 251 – 300                 Answer key: PART VI
PART 7: MCQs from Number 301 – 350                 Answer key: PART VII
PART 8: MCQs from Number 351 – 400                 Answer key: PART VIII
PART 9: MCQs from Number 401 – 450                 Answer key: PART IX
PART 10: MCQs from Number 451 – 500                 Answer key: PART X

Continue Practice Exam Test Questions Part III of the Series

Choose the letter of the best answer in each questions.

101. What refers to a document that shows proof of legal ownership of a financial security?

  • A. Bond
  • B. Bank note
  • C. Coupon
  • D. Check

102. What type of bond is issued jointly by two or more corporations?

  • A. Mortgage bond
  • B. Joint bond
  • C. Tie-up bond
  • D. Trust bond

103. What type of bond whose guaranty is in lien on railroad equipment, such as freight and passenger cars, locomotives, etc.?

  • A. Railroad bond
  • B. Equipment obligation bond
  • C. Equipment bond
  • D. Equipment trust bond

104. A type of bond to which are attached coupons indicating the interest due and the date when such interest is to be paid is called ______.

  • A. Registered bond
  • B. Coupon bond
  • C. Mortgage bond
  • D. Collateral trust bond

105. What bond whose security is a mortgage on certain specified assets of the corporation?

  • A. Registered bond
  • B. Collateral trust bond
  • C. Mortgage bond
  • D. Debenture bond

106. A bond without any security behind them except a promise to pay by the issuing corporation is called ______.

  • A. Joint bond
  • B. Debenture bond
  • C. Trust bond
  • D. Common bond

107. A type of bond where the corporation pledges securities which it owns such as the stock or bonds of one of its subsidiaries.

  • A. Mortgage bond
  • B. Joint bond
  • C. Security bond
  • D. Collateral trust bond

108. What type of bond where the corporation’s owner name are recorded and the interest is paid periodically to the owners with their asking for it?

  • A. Preferred bond
  • B. Registered bond
  • C. Incorporators bond
  • D. Callable bond

109. What type of bond which can be redeemed before maturity date?

  • A. Preferred bond
  • B. Registered bond
  • C. Incorporators bond
  • D. Callable bond

110. What is the feature of some bonds whereby the issuer can redeem it before it matures?

  • A. Return clause
  • B. Callability
  • C. Recall clause
  • D. Call class

111. The price at which the callable bond will be redeemed from the bondholder is called ______.

  • A. Par value
  • B. Call value
  • C. Face value
  • D. Redemption value

112. What is defined as the reduction or fall of the value of an asset due to constant use and passage of time?

  • A. Depletion
  • B. Inflation
  • C. Depreciation
  • D. Deflation

113. In what method of computing depreciation where it assumes that the loss in value is directly proportional to the age of the equipment or asset?

  • A. Straight line method
  • B. Sinking fund method
  • C. Sum-of-year digit method
  • D. Declining balance method

114. In what method of computing depreciation where it assumes that a sinking fund is established in which funds will accumulate for replacement purposes?

  • A. Straight line method
  • B. Sinking fund method
  • C. Sum-of-year digit method
  • D. Declining balance method

115. In what method of computing depreciation where it assumes that the annual cost of depreciation is a fixed percentage of the book value at the beginning of the year?

  • A. Straight line method
  • B. Sinking fund method
  • C. Sum-of-year digit method
  • D. Declining balance method

116. In SYD method of computing depreciation, which of the following is the formula in finding the sum of years’ digits?

  • A. image
  • B. image
  • C. image
  • D. image

117. The declining balance method is also known as ______.

  • A. Double percentage method
  • B. Constant percentage method
  • C. Modified sinking fund method
  • D. Modified SYD method

118. What type of depreciation is due to the reduction in the demand for the function that the equipment or asset was designed to render?

  • A. Functional depreciation
  • B. Design depreciation
  • C. Physical depreciation
  • D. Demand depreciation

119. What type of depreciation is due to the reduction of the physical ability of an equipment or asset to produce results?

  • A. Functional depreciation
  • B. Design depreciation
  • C. Physical depreciation
  • D. Demand depreciation

120. The functional depreciation is sometimes called ______.

  • A. Demand depreciation
  • B. Adolescence
  • C. Life depreciation
  • D. Failure depreciation

121. What is defined as the reduction of the value of certain natural resources such as mines, oil, timber, quarries, etc. due to the gradual extraction of its contents?

  • A. Depletion
  • B. Inflation
  • C. Depreciation
  • D. Deflation

122. What are the common methods of computing depletion charge?

  • A. Rational method and irrational method
  • B. Conservative method and conventional method
  • C. Unit method and percentage method
  • D. Discrete method and depletion allowance method

123. Under the depletion allowance method in computing depreciation, the depletion charge is equal to either ______ whichever is smaller.

  • A. Fixed percentage of gross income or the net taxable income
  • B. Fixed percentage of gross income or 50% of the net taxable income
  • C. 50% of the fixed percentage of gross income or 50% of the net taxable income
  • D. 50% of the fixed percentage of gross income or the net taxable income

124. The depletion allowance method of computing depletion is commonly known as ______.

  • A. Unit method
  • B. Percentage method
  • C. Factor method
  • D. Sinking fund method

125. What is another term for “unit method” for computing depletion?

  • A. Initial cost method
  • B. Percentage method
  • C. Factor method
  • D. Sinking fund method

126. Using factor method, the depletion at any given year is equal to:

  • A. Initial cost of property times number of unit sold during the year divided by the total units in property
  • B. Initial cost of property divided by the number of units sold during the year
  • C. Initial cost of property times number of units sold during the year
  • D. Initial cost of property divided by the total units in property

127. What do you call the after-tax present worth of all depreciation effects over the depreciation period of the asset?

  • A. Asset recovery
  • B. Depreciation recovery
  • C. Period recovery
  • D. After-tax recovery

128. A mathematical expression also known as the present value of annuity of one is called ______.

  • A. Load factor
  • B. Demand factor
  • C. Sinking fund factor
  • D. Present worth factor

129. The amount of property in which a willing buyer to a willing seller for the property when neither one is under the compulsion to buy nor to sell is called ______.

  • A. Fair value
  • B. Market value
  • C. Good will value
  • D. Book value

130. Salvage value is sometimes known as ______.

  • A. Scrap value
  • B. Going value
  • C. Junk value
  • D. Second-hand value

131. What refers to the value of an asset which a disinterested third party, different from the buyer and seller, will determine in order to establish a price acceptable to both parties?

  • A. Book value
  • B. Market value
  • C. Fair value
  • D. Franchise value

132. What refers to the value of an intangible item which arises from the exclusive right of a company to provide a specified product and service in a certain region of the country?

  • A. Company value
  • B. Going value
  • C. Goodwill value
  • D. Franchise value

133. The first cost to be incurred if the piece of equipment now in place had been bought for a second hand dealer or some other business is called ______.

  • A. Material cost
  • B. Fixed cost
  • C. First cost
  • D. In-place value

134. In computing depreciation of an equipment, which of the following represents the first cost?

  • A. The original purchase price and freight charges
  • B. Installation expenses
  • C. Initial taxes and permit fees
  • D. All of the above

135. The process of determining the value or worth of a physical property for specific reason is called ______.

  • A. Investment
  • B. Valuation
  • C. Economy
  • D. Depletion

136. The unrecovered depreciation which results due to poor estimates as to the life of the equipment is called ______.

  • A. Sunk cost
  • B. Economic life
  • C. In-place value
  • D. Annuity

137. What refers to the present worth of cost associated with an asset for an infinite period of time?

  • A. Annual cost
  • B. Increment cost
  • C. Capitalized cost
  • D. Operating cost

138. Capitalized cost of a project is also known as ______.

  • A. Infinite cost
  • B. Life cycle cost
  • C. Life cost
  • D. Project cost

139. What is normally used to compare alternatives that accomplish the same purpose but have unequal lives?

  • A. Capitalized cost method
  • B. Present worth method
  • C. Annual cost method
  • D. MARR

140. What method is often used in municipal project evaluations where benefits and costs accrue to different segments of the community?

  • A. Annual cost method
  • B. Benefit-cost ratio
  • C. Rate of return method
  • D. EUAC

141. What refers to an imaginary cost representing what will not be received if a particular strategy is rejected?

  • A. Opportunity cost
  • B. Ghost cost
  • C. Horizon cost
  • D. Null cost

142. What is the main reason why the sinking fund method of computing depreciation is seldom used in the industry?

  • A. Unstable economy
  • B. Rate of interest cannot be exactly determined
  • C. The initial deprecation is high
  • D. The initial depreciation is low

143. What is the factor name of the formula (1+i)^-n?

  • A. Uniform gradient future worth
  • B. Capital recovery
  • C. Single payment present worth
  • D. Single payment compound amount

144. What is the factor name of the formula [i(1+i)^n]/[((1+i)^n)-1]?

  • A. Uniform series sinking fund
  • B. Capital recovery
  • C. Single payment present worth
  • D. Uniform gradient future worth

145. A form of business organization in which a person conducts his business alone and entirely for his own profit, being solely responsible for all its activities and liabilities.

  • A. Sole proprietorship
  • B. Entrepreneurship
  • C. Partnership
  • D. Corporation

146. Is an artificial being created by operation of law, having the right of succession and the process, attributes and properties expressly authorized by the law or incident to its existence.

  • A. Corporation
  • B. Property
  • C. Partnership
  • D. Organization

147. What is the simplest form of business organization?

  • A. Sole proprietorship
  • B. Partnership
  • C. Enterprise
  • D. Corporation

148. Double taxation is a disadvantage of which business organization?

  • A. Sole proprietorship
  • B. Partnership
  • C. Corporation
  • D. Enterprise

149. In case of bankruptcy of a partnership,

  • A. The partners are not liable for the liabilities of the partnership
  • B. The partnership assets (excluding the partners personal assets) only will be used to pay the liabilities
  • C. The partners personal assets are attached to the debt of the partnership
  • D. The partners nay sell stock to generate additional capital

150. Which is true about partnership?

  • A. It has a perpetual life.
  • B. It will be dissolved if one of the partners ceases to be connected with the partnership.
  • C. It can be handed down from one generation of partners to another.
  • D. Its capitalization must be equal for each partner.

Complete List of MCQs in General Engineering and Applied Science per topic

MCQs in Engineering Economics Part III
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