Mine Economics — Part 1 MCQs with Explanations

21.88 is the correct answer to “A coal mine receives two bids for purchase of a new dragline. The first bid quotes Rs. 150 crore as a price to be paid in full on delivery. The second bid quotes Rs. 180 crore as a price payable at the end of the third year after delivery. If the discount rate is 12%, the difference in NPV between the first and second bids in crore of rupees is”. This question is standard in competitive examination syllabi for Mine Economics.

6795 is the correct answer to “A person borrows a sum of Rs. 50,000 @ 6% interest rate for 10 years. Determine the equal annual sum to be paid at the end of each year to repay the loan.”. This question is standard in competitive examination syllabi for Mine Economics.

640 is the correct answer to “The probability distribution of the outcome of an investment is Outcome (Rs.) 1000 700 300 Probability 0.2 0.5 0.3 The expected rate of return is”. This question is standard in competitive examination syllabi for Mine Economics.

Speculative rate of return is the correct answer to “Hoskold's formula is used for”. This question is standard in competitive examination syllabi for Mine Economics.

Rs. 34190 is the correct answer to “At a discount rate of 12%, uniform annual savings producing Rs. 6 lakhs at the end of 10 years is”. This question is standard in competitive examination syllabi for Mine Economics.

63 is the correct answer to “A cash flow diagram is shown below. Based on NPV, at 10% rate of interest, the minimum annuity x at which the investment becomes viable is”. This question is standard in competitive examination syllabi for Mine Economics.

15 and 16 is the correct answer to “The cash flow of a project is given as follows: Year 0 1 2 3 4 Cash flow (Rs.) -5000 15000 15000 20000 22500 The internal rate of return (IRR) in percent lies between”. This question is standard in competitive examination syllabi for Mine Economics.

3.81 is the correct answer to “Using Hoskold's formula, the present worth, in rupees of annuity of Rs. 1 per year for the 10 years after the deferment period of 5 years and allowing the purchaser 10 % interest is”. This question is standard in competitive examination syllabi for Mine Economics.

4,00,000 is the correct answer to “An equipment cost Rs. 8,00,000 today and has a service life of 15 years. The salvage value at the end of 15 years is Rs. 2,00,000. What will be the value at the end of 10 years”. This question is standard in competitive examination syllabi for Mine Economics.

498.80 is the correct answer to “The probability distribution of the outcome of an investment is Outcome (Rs.) 1000 700 300 Probability 0.2 0.5 0.3 The measure of risk of the investment based on standard deviation (σ) is given as”. This question is standard in competitive examination syllabi for Mine Economics.

145 is the correct answer to “In a mine site, the cost of shaft sinking in lakhs of rupees is given as 2.64D + 34.8, where D is the shaft depth in m. In the same site, the corresponding cost of driving an incline is 0.96 L, where L is the length of the incline in m. Assuming L by D ratio is 3.0, the depth in m beyond which the shaft sinking becomes more economical is”. This question is standard in competitive examination syllabi for Mine Economics.

12.25 is the correct answer to “An investment of Rs. 10,000, compounded annually, is estimated to return Rs. 20,000 after 6 years from the date of investment. The expected rate of return on this investment in percentage is”. This question is standard in competitive examination syllabi for Mine Economics.

5 is the correct answer to “A company invested Rs. 4 lakhs in a machine. The net income expected from the operation of the machine is Rs. 80,000 per annum. The payback period for the machine in years is”. This question is standard in competitive examination syllabi for Mine Economics.

Rs. 248 is the correct answer to “The net present value of Rs. 400 at the end of 5 years at 10% discount rate is”. This question is standard in competitive examination syllabi for Mine Economics.

1.145 is the correct answer to “A firm, having a cost of capital of 12%, evaluates a small mining project of initial investment of Rs. 100 lakhs. For the benefits shown in the table below, the benefit-cost ratio of the project is Year 1 2 3 4 Benefits (Rs. in lakhs) 25 40 40 50”. This question is standard in competitive examination syllabi for Mine Economics.

70,000 is the correct answer to “A company producing bearing plates for rock bolts has the selling price Rs. 20/unit and the variable cost has Rs. 12/unit. If the total fixed cost is Rs. 5,60,000, then the break even output units of bearing plates is”. This question is standard in competitive examination syllabi for Mine Economics.

Discounting rate < IRR is the correct answer to “As per DCF analysis a project report is acceptable if”. This question is standard in competitive examination syllabi for Mine Economics.

13% is the correct answer to “A mining company is considering the following project: Cash Flows (Rs.) for five years Year 0 1 2 3 4 5 Net Cash Flow In (Rs.) -50000 15000 15000 15000 15000 15000 What is the project's IRR”. This question is standard in competitive examination syllabi for Mine Economics.

20 is the correct answer to “A mining equipment has a life of 5 years with no salvage value. Assuming that the depreciation of the equipment is calculated by the straight line method, the average annual value of the equipment percentage of its original value is”. This question is standard in competitive examination syllabi for Mine Economics.

10.381% is the correct answer to “What will be the effective rate of interest for nominal rate of interest 10%, when money is compounded quarterly”. This question is standard in competitive examination syllabi for Mine Economics.

Depreciation is the correct answer to “Sum of the years digit method is used for”. This question is standard in competitive examination syllabi for Mine Economics.

From the start of the project to the time to recover the total initial investment is the correct answer to “Payback period is the time required”. This question is standard in competitive examination syllabi for Mine Economics.

12 is the correct answer to “A bank lends a mine owner Rs. 1,00,000 today to purchase hand-held drills. If a note of agreement is signed to pay the bank Rs. 1,76,234 at the end of 5 years, the rate of interest in percent compounded yearly on the loan becomes”. This question is standard in competitive examination syllabi for Mine Economics.

2,00,000 is the correct answer to “An O.C. mine requires 16 blocks of overburden of 3000 te each to mine 4 blocks of coal of 2000 te each. The mining cost of both overburden and coal is Rs. 50 per tonne. The cost of transportation of overburden to dump areas is Rs. 50 per tonne. Coal transportation cost to the selling point is Rs. 75 per tonne. The price of coal is Rs. 800 per tonne, If the royalty and tax to the state is Rs. 50 per tonne, the nominal profit in rupees is”. This question is standard in competitive examination syllabi for Mine Economics.

350 is the correct answer to “The cash flow table of a manganese mine for a particular year is shown below: Item Amount (Rs. in lakhs) Revenue 900 Cost (other than depreciation) 300 Depreciation 100 Profit before tax 500 If the corporate tax is 50% of the profit before tax, operating cash inflow in lakhs of rupees is”. This question is standard in competitive examination syllabi for Mine Economics.

24,869 is the correct answer to “The net present value in Rs. of a 3 year annuity of Rs. 10,000 discounted at 10% is”. This question is standard in competitive examination syllabi for Mine Economics.

125 is the correct answer to “The total cost C (Iakh rupees) of a longwall face of length L in m is given by the equation C = 0.1L+ (1562.5/L) + 300. Length of the face in m for the minimum total cost is”. This question is standard in competitive examination syllabi for Mine Economics.

$$\frac{{\left[ {c \pm \sqrt {\left( {{c^2} - 4ab} \right)} } \right]}}{{\left( {2a} \right)}}$$ is the correct answer to “For a mine production t per year, the total cost of production is given by (at 2 + b). The revenue from sale is given by ct. If a, b and c, are constants, the breakeven value of t is”. This question is standard in competitive examination syllabi for Mine Economics.

$$R = P{\left( {1 + i} \right)^n}\left[ {\frac{i}{{{{\left( {1 + i} \right)}^n} - 1}}} \right]$$ is the correct answer to “The uniform end of year payment, R, which can be realized for n years from a single present investment, P, at i rate of interest is”. This question is standard in competitive examination syllabi for Mine Economics.

Rs. 2,40,000 is the correct answer to “A company producing bearing plates for rock bolts has the selling price Rs. 20/unit and the variable cost has Rs. 12/unit. If the total fixed cost is Rs. 5,60,000, then the profit earned for an output of 1,00,000 units of bearing plates is”. This question is standard in competitive examination syllabi for Mine Economics.

Rs. 149/m3 is the correct answer to “For an open pit operation the value of metal is Rs. 210/kg, and recoverable grade is 1.2%. Production cost per tonne of ore inclusive of mining and processing but excluding stripping is Rs. 2000. If the break even stripping ratio is 3.49 m 3 /te. then the stripping cost is (lte = 1000 kg)”. This question is standard in competitive examination syllabi for Mine Economics.

Rs. 4240.12 is the correct answer to “A mining company is considering the following project: Cash Flows (Rs.) for five years Year 0 1 2 3 4 5 Cash flow (Rs.) -50000 +11300 +12769 14428 +16305 +18421 What will be the NPV for the project if the cost of capital is 10%.”. This question is standard in competitive examination syllabi for Mine Economics.

1,20,000 is the correct answer to “A company producing bearing plates for rock bolts has the selling price Rs. 20/unit and the variable cost has Rs. 12/unit, If the total fixed cost is Rs. 5,60,000, then for a target profit of Rs. 4,00,000, the total output units of bearing plates is”. This question is standard in competitive examination syllabi for Mine Economics.

Rs. 3,00,000 is the correct answer to “The ABC copper company recently bought an ore-bearing parcel of land for Rs. 2,000,000. The recoverable reserves in the mine were estimated to be 5,00,000 tons. If 75,000 tons of ore were mined during the first year and 50,000 tons sold, what was the depletion allowance for one year”. This question is standard in competitive examination syllabi for Mine Economics.

21 years is the correct answer to “A company takes a loan of Rs. 25,000 at 8% interest for the extension of a mine. To repay the loan, an additional saving of Rs. 2500 per annum is necessary. The period taken for repayment is”. This question is standard in competitive examination syllabi for Mine Economics.

1.0 is the correct answer to “The following information is provided for an ore deposit: Number of waste blocks = 10 Number of ore blocks = 5 Volume of each waste block, m 3 = 600 Total cost of waste handling per m 3 = Rs. 100 Tonnage of each ore block = 400 Total cost of ore handling per ton = Rs. 150 Sale price of ore per ton = Rs. 500 The net cash flow of mining the deposit in lakhs of rupees, is”. This question is standard in competitive examination syllabi for Mine Economics.

73,233 is the correct answer to “An investment at 10'% yearly interest rate, compounded quarterly, accumulates to a sum of Rs. 120,000 in 5 years. The present value of the sum in rupees is”. This question is standard in competitive examination syllabi for Mine Economics.

6 is the correct answer to “A mining industry has the following total cost and total revenue functions: Total cost = TC = 50 + 100q - 6q 2 + $$\frac{1}{3}$$ q 3 Total revenue = TR = 64q Where q is the output of mine in tonne/day The profit will be maximized for what level of production”. This question is standard in competitive examination syllabi for Mine Economics.

III is the correct answer to “Four alternative investment opportunities are available in a mining project each offering different revenues for the next two years as shown in the table. If the interest rate is 10% annually, which alternative provides the best investment opportunity based on the net present value? Case I Case II Case III Case IV Initial Investment (Rs.) 40,000 1,00,000 80,000 1,20,000 Return in Year 2 30,000 75,000 65,000 80,000 Return in Year 3 30,000 75,000 65,000 80,000”. This question is standard in competitive examination syllabi for Mine Economics.

31,700 is the correct answer to “The present value of a 4 year annuity of Rs. 10,000 discounted at 10% is”. This question is standard in competitive examination syllabi for Mine Economics.