MIME 310 - Sample Final Exam

MIME 310 - Sample Final Exam - MIME 310 ENGINEERING ECONOMY...

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MIME 310 ENGINEERING ECONOMY Tuesday, 2 December, 16:00 - 17:30, 304 ENGMC If you want to maximize the benefits associated with this exercise, here's what you should do: § Give yourself a two to three-hour period to complete the exam. § Don't do the exam with friends; pretend that you're in a real examina- tion room, sitting right in front of an invigilator. § Don't lose precious time trying to find the answers in the notes, solu- tions to the problem exercises or tutorial problems. ( “Doctus cum li- bro” ). § On the date noted above, the solutions will be presented in the spe- cial review class. You will be able to correct your exam and obtain the solutions to the questions that you solved incorrectly or to which you didn't answer. P R A C T I C E E X A M E X A M
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1 PART 1. True or False Statements – All your answers must be recorded on the computer an- swer sheet; 1 mark each. Note : There are no penalties for incorrect answers. 1. If the required rate of return on a bond is greater than its effective annual coupon rate, the market value of that bond will always be below its par value until the bond matures, at which time its market value will equal its par value. a) T b) F 2. The sale of an asset in a particular asset class can simultaneously trigger a depreciation recapture and a loss on disposal. a) T b) F 3. You have just noticed in the financial pages of the local newspaper that you can buy a bond with a face value of $1000 for $800. If the coupon rate is 10 percent, with interest paid once per year, and the bond matures in 9 years, you should make the purchase if your required return on investment for this type of security is 12 percent. a) T b) F 4. Interest and dividends paid by a corporation are considered to be deductible operating expenses, and therefore decrease a firm's tax liability. a) T b) F 5. For given demand and supply schedules, the market equilibrium is always in a price in- terval in which demand is elastic because the total consumer expenditure in this price range de- creases. a) T b) F 6. If a firm has budgeted $250 000 as salary expenses and faces a 30% corporate income tax rate, then the after-tax cost of the expense will be $175 000. a) T b) F 7. When using the equivalent annual value criterion to compare equipment alternatives, it is assumed that continuous replacements are made for as long as the service of such equipment is required. a) T b) F 8. Projects X and Y (with unique investments at time 0 followed by positive cash flows over identical lives) have the same NPV when the discount rate is zero. However, project X has lar- ger cash flows in the early years of its life than project Y. Therefore, at all discount rates greater than zero, project Y will have a greater NPV than that of project X. a) T
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This note was uploaded on 04/25/2010 for the course MIME 310 taught by Professor Bilido during the Winter '08 term at McGill.

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MIME 310 - Sample Final Exam - MIME 310 ENGINEERING ECONOMY...

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