Free Plant Design and Economics MCQs with Answers

• A. p(1 - i.n)
• B. p(1 + i.n)
• C. p(1 + i)n
• D. p.i.n.

Explanation: Simple interest is calculated only on the original principal in every period, so total interest after n periods is I = pin.

• A. Decreases
• B. Increases
• C. Increases linearly
• D. Remain constant

Explanation: Increasing the discount rate reduces the present value of every future cash flow, while the initial investment remains unchanged.

• A. Manufacturing cost
• B. Discrete compound interest
• C. Depreciation by sinking fund method
• D. Cash ratio

Explanation: The sinking-fund depreciation method deposits equal periodic amounts so that, with interest accumulation, the total reaches the required…

• A. Plant overhead cost
• B. Fixed charges
• C. General expenses
• D. Direct production cost

Explanation: Utilities such as power, steam, cooling water and fuel are consumed directly during production, so their cost is included in direct…

• A. Initial cost
• B. Difference between initial cost and salvage value
• C. Depreciation during the (n - 1)th year
• D. Book value at the end of (n - 1)th year

Explanation: In the diminishing-balance method, depreciation is a fixed percentage of the asset’s opening book value for that year.

• A. > 20
• B. 20
• C. 10
• D. < 20

Explanation: With 10% earned in each half-year period, the annual growth factor is (1.10)² = 1.21, giving a 21% annual return.

• A. 10 to 20
• B. 35 to 45
• C. 55 to 65
• D. 70 to 80

Explanation: Equipment installation includes erection, foundations, piping connections, electrical work and related labor.

• A. Competition from other manufactures
• B. Product distribution
• C. Economics
• D. Opportunities

Explanation: Market analysis examines competition, distribution channels and market opportunities for the product.

• A. 30
• B. 50
• C. 75
• D. 95

Explanation: Seasonal plants need extra funds to cover inventory and operating expenses during the production or selling cycle.

• A. Net present worth
• B. Pay out period
• C. Discounted cash flow
• D. Rate of return on investment

Explanation: The payback or payout period measures how long cumulative cash inflows take to recover the investment, and standard versions often omit…

• A. Low alloy steel
• B. Lead
• C. High alloy steel
• D. Titanium

Explanation: Titanium is exceptionally expensive compared with low-alloy steel, lead and most high-alloy steels, although it is selected when its…

• A. Working capital
• B. Overhead cost
• C. Indirect production cost
• D. Direct production cost

Explanation: Total capital investment has two main parts: fixed capital investment for land, equipment and facilities, and working capital for…

• A. 1000 (1 + 0.1)20
• B. 1000 (1 + 0.1/4)20
• C. 1000 (1 + 0.1/4)5
• D. 1000 (1 + 0.1/2)5

Explanation: Five years at quarterly compounding gives 5 × 4 = 20 compounding periods.

• A. Quarterly
• B. Semi-annually
• C. Annually
• D. In no case, they are equal

Explanation: The effective annual rate equals the nominal rate only when interest is compounded once per year.

• A. Neither A. nor B.
• B. Declining balance
• C. Both A. and B.
• D. Straight line method

Explanation: Straight-line and declining-balance methods allocate the equipment cost over its service life but do not include interest on invested…

• A. Gives a correct picture of profitability
• B. Does not measure the discounted rate of return
• C. Underemphasises liquidity
• D. Takes into account the cash inflows after the recovery of investments

Explanation: The simple payback period measures how quickly the initial investment is recovered, but it ignores the time value of money and does not…

• A. Fixed charges
• B. Plant overheads
• C. Administrative expenses
• D. Direct products cost

Explanation: Manufacturing cost includes direct product costs, plant overheads, and fixed charges associated with production.

• A. Ageing
• B. Wear and tear
• C. Breakdown or accident
• D. Obsolescence

Explanation: Functional depreciation results when equipment loses value because a newer, more efficient, or better-designed alternative makes it…

• A. Decrease
• B. Increase
• C. No change
• D. None of these

Explanation: Depreciation is recorded as an expense, so it reduces the profit reported by a plant over time.

• A. Fixed
• B. Utilities
• C. Overhead
• D. Capital

Explanation: Effluent treatment requires operating services such as water handling, treatment chemicals, power and waste disposal, so it is commonly…