Working capital refers to the funds required for current assets that are needed for the start-up
and support of operational activities. (T/F) - True
A license fee is an example of an incremental cost. (T/F) - False
One reason why perfect monopolies rarely occur in practice is because:
a) Few products are so unique that substitutes cannot be used.
b) A large number of vendors can supply the same product.
c) Additional suppliers can enter the marker freely
d) People usually stop buying the product before this occurs.
Your company must decide what to do with an old pump it purchased 12 years ago. The pump
hasn't been used for two years and is now in storage. You have collected the following data;
Purchase price 12 years ago = $7,000
Storage costs to date = $500
Current price for a new pump = $12,000
Amount offered for the pump two years ago = $1,250
Best estimate of what the pump would bring today = $1,000
What is the opportunity cost associated with this pump?
a) $1,750
b) $1,500
c) $1,000
d) $1,250
An internet provider has a fixed cost of $740 a month and variable costs of $50a month per
subscriber. If the company charges $70 a month for the service, what is the breakeven point for
the company in terms of subscribers per month? (round to nearest whole number) - 37
An index is a dimensionless number that indicates how a cost or price has changed with time
with respect to a base year. (T/F) - True
The power-sizing technique is sometime referred to as a linear model. (T/F) - False
Which technique sums the product of several quantities or components and adds these to any
components estimated directly?
a) Unit technique
b) Power-sizing technique
, c) Factor technique
d) Adding technique
What does Cn stand for in the index equation?
a) Reference year for which cost is known.
b) Cost or price of the item in reference year.
c) Year for which the cost is to be estimated.
d) Estimated cost of price of the item in year being analyzed.
The cost of standard lithography equipment with a capicity of 115 circuit boards per hour is
$2,400. If the cost for custom lithography equipment with a capcity of 210 circuit boards per
hour is $6,600, what is the value of the cost capacity factor? - 1.67991
A cash flow diagram summarizes the timing and magnitude of cash flows as they occur over
time. (T/F) - True
On a cash flow diagram, the vertical arrows pointing upwards represent a negative cash flow.
(T/F) - False
Nominal interest rate is found by multiplying the __________ by the number of compounding
periods per year.
a) Principle sum
b) Interest rate per compounding period
c) Effective interest rate
d) None of the above
Mathematical equivalence is a consequence of the mathematical relationship between
_______.
a) First cost and salvage value
b) Sunk costs and opportunity cost
c) Depreciation and market value
d) Time and money
What is the annual effective interest rate equivalent for a nominal rate of 6.000%, compounded
semi-annually? (three decimal places accuracy) - 6.090 (ie = (1 + r/m)^m - 1)
The timing of cash flows is always simple and regular. (T/F) - False
An assumption required by the principle of discrete compounding is that the compounding
periods are of equal length. (T/F) - True
and support of operational activities. (T/F) - True
A license fee is an example of an incremental cost. (T/F) - False
One reason why perfect monopolies rarely occur in practice is because:
a) Few products are so unique that substitutes cannot be used.
b) A large number of vendors can supply the same product.
c) Additional suppliers can enter the marker freely
d) People usually stop buying the product before this occurs.
Your company must decide what to do with an old pump it purchased 12 years ago. The pump
hasn't been used for two years and is now in storage. You have collected the following data;
Purchase price 12 years ago = $7,000
Storage costs to date = $500
Current price for a new pump = $12,000
Amount offered for the pump two years ago = $1,250
Best estimate of what the pump would bring today = $1,000
What is the opportunity cost associated with this pump?
a) $1,750
b) $1,500
c) $1,000
d) $1,250
An internet provider has a fixed cost of $740 a month and variable costs of $50a month per
subscriber. If the company charges $70 a month for the service, what is the breakeven point for
the company in terms of subscribers per month? (round to nearest whole number) - 37
An index is a dimensionless number that indicates how a cost or price has changed with time
with respect to a base year. (T/F) - True
The power-sizing technique is sometime referred to as a linear model. (T/F) - False
Which technique sums the product of several quantities or components and adds these to any
components estimated directly?
a) Unit technique
b) Power-sizing technique
, c) Factor technique
d) Adding technique
What does Cn stand for in the index equation?
a) Reference year for which cost is known.
b) Cost or price of the item in reference year.
c) Year for which the cost is to be estimated.
d) Estimated cost of price of the item in year being analyzed.
The cost of standard lithography equipment with a capicity of 115 circuit boards per hour is
$2,400. If the cost for custom lithography equipment with a capcity of 210 circuit boards per
hour is $6,600, what is the value of the cost capacity factor? - 1.67991
A cash flow diagram summarizes the timing and magnitude of cash flows as they occur over
time. (T/F) - True
On a cash flow diagram, the vertical arrows pointing upwards represent a negative cash flow.
(T/F) - False
Nominal interest rate is found by multiplying the __________ by the number of compounding
periods per year.
a) Principle sum
b) Interest rate per compounding period
c) Effective interest rate
d) None of the above
Mathematical equivalence is a consequence of the mathematical relationship between
_______.
a) First cost and salvage value
b) Sunk costs and opportunity cost
c) Depreciation and market value
d) Time and money
What is the annual effective interest rate equivalent for a nominal rate of 6.000%, compounded
semi-annually? (three decimal places accuracy) - 6.090 (ie = (1 + r/m)^m - 1)
The timing of cash flows is always simple and regular. (T/F) - False
An assumption required by the principle of discrete compounding is that the compounding
periods are of equal length. (T/F) - True
