Chemical Engineering Plant Economics (Objective Questions With Answers)




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07. If an amount R is paid at the end of every year for 'n' years, then the net present value of the
annuity at an interest rate of i is
(A) R [{(1 + i)n - 1}/ i ]
(B) R [{(1 + i)n - 1}/ i (1 + i)n]
(C) R(1 + i)n
(D) R/(1 + i)n
Answer: Option B

08. Pick out the wrong statement.
(A) The annual depreciation rate for machinery and equipments in a chemical process plant is
about 10% of the fixed capital investment
(B) Annual depreciation rate of buildings in a chemical plant is about 3% of its initial cost
(C) Insurance rates on annual basis in a chemical plant may be about 1% of the fixed capital investment
(D) In a chemical industry, research and development cost amounts to about 15% of net sales
realisation (NSR)
Answer: Option D

09. Which of the following does not come under the sales expenses for a product of a chemical
plant?
(A) Advertising
(B) Warehousing
(C) Legal fees
(D) Customer service
Answer: Option C

10. Operating profit of a chemical plant is equal to
(A) Profit before interest and tax i.e., net profit + interest + tax
(B) Profit after tax plus depreciation
(C) Net profit + tax
(D) Profit after tax
Answer: Option A

11. Which of the following is not a current asset of a chemical company?
(A) Inventories
(B) Marketable securities
(C) Chemical equipments
(D) None of these
Answer: Option C

12. __________ taxes are based on gross earnings.
(A) Property
(B) Excise
(C) Income
(D) Capital gain
Answer: Option C

13. A balance sheet for an industrial concern shows
(A) The financial condition at any given time
(B) Only current assets
(C) Only fixed assets
(D) Only current and fixed assets
Answer: Option A

14. Pick out the wrong statement.
(A) Gross revenue is that total amount of capital received as a result of the sale of goods or service
(B) Net revenue is the total profit remaining after deducting all costs excluding taxes
(C) The ratio of immediately available cash to the total current liabilities is known as the cash ratio
(D) Consolidated income statement based on a given time period indicates surplus capital and
shows the relationship among total income, costs & profit over the time interval
Answer: Option B

15. Pick out the correct statement.
(A) Difference between income and expense is termed as gross revenue
(B) Unamortised cost is the difference between the original cost of a property and all the depreciation charges made to date
(C) Sum-of-the-years-digits methods of depreciation calculation accounts for the interest on the investment
(D) Scrap value is the net amount of money obtainable from the sale of used property over and
above any charges involved in its removal & sale
Answer: Option B

16. A series of equal payments (e.g., deposit or cost) made at equal intervals of time is known as
(A) Perpetuity
(B) Capital charge factor
(C) Annuity
(D) Future worth
Answer: Option C 

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