Midterm Summer 2009

Midterm Summer 2009 - VERSION #1 FAMILY NAME / INITIAL...

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VERSION #1 FAMILY NAME / INITIAL STUDENT ID # S O L U T I O N S MIME 310 ENGINEERING ECONOMY – CLASS TEST 25 May, 2009 – 8:30 to 10:30 Part 1. Multiple-choice Statements Circle the correct answer on this paper and re- cord it on the computer answer sheet. (3 points each for a total of 15) Note : There are no penalties for incorrect answers. 1. If you are willing to pay $20 for a shirt but you only have to pay the market price of $16, the $4 difference is: A) your consumer surplus. B) the producer’s deficit. C) your consumer deficit. D) the producer’s surplus. E) None of the choices listed above 2. Which one of the following statements is true about the differences between long-term debt and common stock? A) Long-term debt is ownership in a firm but equity is not. B) Creditors have voting power while stockholders do not. C) Periodic payments associated with either class of security are tax deductible for the issuer. D) Interest payments on long-term debt are promised while dividend payments are not. E) Bondholders can also own equity, but not vice versa. 3. In a total production cost function, if the marginal cost is above the average cost at a par- ticular production rate, then the production of one additional unit will cause the: A) average cost to increase. B) average cost to remain unchanged. C) marginal cost to decrease. D) marginal cost to remain unchanged. E) average cost to decrease. 4. In a statement of cash flow, which one of the following elements would be considered a use of funds? A) An increase in fixed assets at cost B) An increase in retained earnings C) A decrease in accounts receivables D)
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MIME 310 ENGINEERING ECONOMY CLASS TEST – Monday, 25 May, 2009 – 8:30 to 10:30 Page 2 ═════════════════════════════════════════════════════════════════════════ VERSION #1 5. The present value ratio (PVR) rule can be stated as: A) A project is acceptable if its PVR is greater than zero. B) A project is acceptable if its PVR is greater than one. C) A project is acceptable if its PVR is greater than the internal rate of return. D) A project is acceptable if its PVR is less than the net present value. E) None of the choices given above is acceptable. Part 2. Multiple-choice Problems – Circle the correct answer on this paper and record it on the computer answer sheet. (4 points each for a total of 72) Note : There are no penalties for incorrect answers. Use the following information to answer questions 6 to 8. An asset costs $30 000 and has an estimated salvage value of $5000 at the end of a useful life of 5 years. 6.
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This note was uploaded on 11/22/2010 for the course MIME MIME 310 taught by Professor Jassim during the Winter '09 term at McGill.

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Midterm Summer 2009 - VERSION #1 FAMILY NAME / INITIAL...

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