Solutions to practice exam

Solutions to practice exam - Engineering Economy Practice...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
Engineering Economy Practice Exam Solutions
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
1. In the Canadian tax system, 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 2. For given demand and supply schedules, the market equilibrium is always in a price interval in which demand is elastic because the total consumer expenditure in this price range decreases. A) T B) F 3. When using the equivalent annual value criterion to compare equipment alternatives, it is assumed that continuous replace- ments are made for as long as the service of such equipment is required. A) T B) F
Background image of page 2
4. A capital gain occurs when a depreciable asset is sold for more than its undepreciated balance at the time of sale, but for less than its purchase price. A) T B) F 5. In the Canadian tax system, assets belonging to the same class depreciated by the declining-balance method are grouped into pools and depreciated together. A) T B) F 6. The discounted payback period is superior to the payback period because it considers the cash flows that occur beyond the discounted capital recovery period. A) T B) F
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
7. When using an integrated company basis of taxation in project evaluation, any excess of operating expenses and tax allowances over a project's revenue in a particular year is assumed to be absorbed by other taxable corporate income of the company. A) T B) F 8. A change in supply to higher quantity levels is reflected by a vertical upward shift of the supply curve. A) T B) F 9. The law of diminishing marginal returns states that decreasing amounts of output will inevitably be obtained from successive additions of equal amounts of variable input in a system where fixed resources have achieved their optimum efficiency. A) T B) F
Background image of page 4
10. When using the capital tax factor on a capital expenditure, it is assumed that depreciation allowances can be fully absorbed (i.e. there is enough net income before allowances and taxes) in the year in which they are claimed. A) T B) F 11. Assume that a project requires additions to working capital in each year of its life, all to be recovered at the end along with the initial input. In this case, the present value at the beginning of the project’s life (i.e. time 0) of the recovered working capital will exceed the total outlays of working capital. A) T B) F 12. Any regular bond with any maturity period will have a market value equal to its face value if the coupon rate is the same as the going market rate (expressed as a nominal rate with the same compounding interval as that of the bond). A) T B) F
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
BJL Incorporated Income Statement for 1999 (‘000 000 $) Net sales 1384 Less: Cost of goods sold 605 Less: Depreciation 180 Earnings before interest and taxes 599 Less: Interest on long-term debt 80 Taxable income 519 Less: Income taxes 156 Net income 363 Addition to retained earnings 254 Dividends paid 109 Use the financial statements below to answer questions 13 to 17.
Background image of page 6
BJL Incorporated Balance Sheets at 12/31/98 and 12/31/99
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/15/2011 for the course MIME 310 taught by Professor Bilido during the Fall '08 term at McGill.

Page1 / 38

Solutions to practice exam - Engineering Economy Practice...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online