An investment of Rs. 100 lakhs is to be made for construction of a plant, which will take two years to start production. The annual profit from the operation of the plant is Rs. 20 lakhs. What will be the payback time?
5 years
7 years
12 years
10 years
Correct Answer :
B. 7 years
Related Questions
Fixed capital investment of a chemical plant is the total amount of money needed to supply the necessary plant and manufacturing facilities plus the working capital for operation of the facilities. Which of the following components of fixed capital investment requires minimum percentage of it?
Electrical installation cost
Equipment installation cost
Cost for piping
Equipment insulation cost
Construction expenses are roughly __________ percent of the total direct cost of the plant.
2
10
30
50
Which of the following is not a current asset of a chemical company?
Inventories
Marketable securities
Chemical equipments
None of these
Which of the following is the cheapest material of construction for the storage of sodium hydroxide upto a concentration of 75%?
Stainless steel
Plain carbon steel
Nickel
Copper
Manufacturing cost in a chemical company does not include the
Fixed charges
Plant overheads
Direct products cost
Administrative expenses
For a given fluid, as the pipe diameter increases, the pumping cost
Decreases
Increases
Remains the same
May increase or decrease, depending upon whether the fluid is Newtonian or non-Newtonian
__________ taxes are based on gross earnings.
Property
Excise
Income
Capital gain
Pick out the correct statement.
Difference between income and expense is termed as gross revenue
Unamortised cost is the difference between the original cost of a property and all the depreciation charges made to date
Sum-of-the-years-digits methods of depreciation calculation accounts for the interest on the investment
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
'Lang factor' is defined as the ratio of the capital investment to the delivered cost of major equipments. The value of 'Lang factor' for fixed capital investment, for a solid-fluid processing chemical plant ranges from
1.2 to 1.4
2.5 to 2.7
4.2 to 4.4
6.2 to 6.4
'Six-tenth factor' rule is used for estimating the
Equipment installation cost
Equipment cost by scaling
Cost of piping
Utilities cost
Payback period
And economic life of a project are the same
Is the length of time over which the earnings on a project equals the investment
Is affected by the variation in earnings after the recovery of the investment
All (A), (B) and (C)
Equipment installation cost in a chemical process plant ranges from __________ percent of the purchased equipment cost.
10 to 20
35 to 45
55 to 65
70 to 80
In declining balance method of depreciation calculation, the
Value of the asset decreases linearly with time
Annual cost of depreciation is same every year
Annual depreciation is the fixed percentage of the property value at the beginning of the particular year
None of these
Cost of instrumentation in a modern chemical plant ranges from __________ percent of the total plant cost.
5 to 10
20 to 30
40 to 50
60 to 70
Generally, income taxes are based on the
Total income
Gross earning
Total product cost
Fixed cost
Fixed charges for a chemical plant does not include the
Interest on borrowed money
Rent of land and buildings
Property tax, insurance and depreciation
Repair and maintenance charges
The amount of simple interest during 'n' interest period is (where, i = interest rate based on the length of one interest period, p = principal)
p.i.n.
p(1 + i.n)
p(1 + i)n
p(1 - i.n)
The 'total capital investment' for a chemical process plant comprises of the fixed capital investment and the
Overhead cost
Working capital
Indirect production cost
Direct production cost
'P' is the investment made on an equipment, 'S' is its salvage value and 'n is the life of the equipment in years. The depreciation for Rath year by the sum-of years digit method will be
(P - S)/n
1 - (P/S)1/m
(m/n) (P - S)
[2 (n - m + 1)/n(n + 1)]. (P - S)
Which of the following is the costliest source of getting hydrogen on commercial scale for the manufacture of nitrogenous fertiliser?
Coal gasification
Steam reforming of naphtha
Electrolysis of water
Coke oven gas
Which of the following is not a component of working capital?
Raw materials is stock
Finished products in stock
Transportation facilities
Semi-finished products in the process
Pick out the wrong statement.
Gross margin = net income - net expenditure
Net sales realisation (NSR) = Gross sales - selling expenses
At breakeven point, NSR is more than the total production cost
Net profit = Gross margin - depreciation - interest
Pick out the wrong statement.
Debt-equity ratio of a chemical company describes the lenders contribution for each rupee of owner's contribution i.e., debt-equity ratio = total debt/net worth
Return on investment (ROI) is the ratio of profit before interest & tax and capital employed (i.e. net worth + total debt)
Working capital = current assets + current liability
Turn over = opening stock + production closing stock
The economic life of a large chemical process plant as compared to a small chemical plant is
Only slightly more
Much more
Slightly less
Almost equal
Pick out the wrong statement.
Longer tubes are less expensive per unit heat transfer area as compared to shorter tubes
A cost index is merely a number for a given year showing the cost at that time relative to a certain base year
Turnover ratio of a chemical plant is the ratio of gross annual sales to the fixed capital investment
Plates with butt welded joints are less expensive compared to lap welded joints, because squaring of plates is not necessary
A balance sheet for a chemical plant shows its financial condition at any given date. It does not contain the __________ of the plant.
Current asset
Current liability
Long term debt
Profit
Cost incurred towards __________ in a chemical plant is a component of the utilities cost.
Water supply
Running a control laboratory
Property protection
Medical services
A reactor having a salvage value of Rs. 10000 is estimated to have a service life of 10 years. The annual interest rate is 10%. The original cost of the reactor was Rs. 80000. The book value of the reactor after 5 years using sinking fund depreciation method will be Rs.
40,096
43,196
53,196
60,196
Effluent treatment cost in a chemical plant is categorised as the __________ cost.
Fixed
Overhead
Utilities
Capital
The __________ of a chemical company can be obtained directly from the balance sheet as the difference between current assets and current liabilities.
Cash ratio
Net working capital
Current ratio
Liquids assets