This set of Civil Engineering Drawing Multiple Choice Questions & Answers (MCQs) focuses on “Values, Tax, Funds & Rents etc”.
1. _____________ is the technique of estimating or determining the fair price or value of a property such as a building, a factory, other engineering structures of various types.
b) capital value
Explanation: By valuation the present value of a property is determined. The present value of property may be decided by its selling price, or income or rent it may fetch. The value of property depends on its structure, life, maintenance, location, bank interest, legal control, etc. The value also depends on supply on demand and the purpose for which valuation is required.
2. What is the capitalized value of a property fetching a net annual rent of Rs.1000 and the highest rate of interest prevalent being 5%, rate of interest is 8%?
Explanation: For Rs.5.00 interest, capital Rs.1000.00
To get Rs.1000.00 interest, capital = (100/5)*1000
In short capitalized value is – Net annual income*Year’s purchase
For the same net income if the rate of interest is 8% the capitalized value = 1000*(100/8) = Rs.12500.00.
3. A pumping set with a motor has been installed in a building at a cost of Rs.2500.00. Assuming the life of the pump as 15 years, work out the amount of annual instalment of sinking fund required to be deposited to accumulate the whole amount of 4% compound interest.
Explanation: The annual sinking fund, I = Si / [(1+i)n-1] = 2500*0.04/(1+0.04)15-1 = 2500*0.05 = Rs.125
The owner is to deposit Rs.125/- annually in 4% compound interest carrying investment for 15 years to accumulate Rs.2500/-.
4. An old building has been purchased by a person at a cost of Rs.30000/- excluding the cost of the land. Calculate the amount of annual sinking fund at 4% interest assuming the future lie of the building as 20 years and the scrap value of the building as 10% of the cost of purchase.
Explanation: The total amount of sinking fund to be accumulated at the end of 20 years.
S = 30000 * 90/100 = Rs.27000.00
Annual instalment of sinking fund.
I = Si / [(1+i)n-1] = 27000*0.04/(1+0.04)20-1 = 27000*0.0336 = Rs.907.20
Annual Instalment for sinking fund required for 20 years = Rs.907.20.
5. In this method, it is assumed that the property will lose its value by a constant percentage of its value at the beginning of every year. This method is called?
a) Sinking fund method
b) Constant percentage method
c) Straight line method
d) Quantity survey method
Explanation: In this method a fixed amount of the original cost is deducted every year so that at the end of the utility period only the scrap value is left.
Annual depreciation D = Original cost-scrap value/life in year = C-S/n,
Where C- original cost, S- scrap value, n-life of the property in years and D- annual depreciation. The book value after the number of years, say N years = original cost – N*D.
6. A property fetches a net annual income of Rs.900 deducting all outgoings. Workout the capitalized value of the property if the rate of interest is 6% per annum.
Explanation: Year’s purchase = 100/6 = 16.67
Capitalized value of the property = Net income * Y.P. = 900*16.67 = Rs.15003.00.
7. A building costing Rs.700000.00 has been constructed on a freehold land measuring 100 sq m recently in a big city. Prevailing rate of land in the neighbourhood is Rs.150.00 per sq m. Determine the net rent of the property, if the expenditure on an outgoing including sinking fund is Rs.24000.00 per annum. Work out also the gross rent of the property per month.
a) 48000/-, 8000/-
b) 18000/-, 6000/-
c) 46700/-, 6000/-
d) 48000/-, 6000/-
Explanation: Cost of construction = Rs.700000.00
Cost of land @Rs.150.00 per sq m = 100*150 = Rs.150000.00
On building @ 6% on the cost of construction = 700000.00 *6/100 = Rs.42000.00
On the land @ 4% on the cost of land = 700000.00 *6/100 = Rs.6000.00
Total net rent per year = Rs.48000.00
Gross rent = Net rent + outgoings = 48000+24000.00 = 72000.00 per annum
Gross rent per month = 72000/12 = 6000.00.
8. Find the plinth area required for the residential accommodation for an assistant engineer in the pay scale of Rs.400.00 to 1000.00 per month.
a) 293.33 sq m.
b) 93.33 sq m.
c) 983.33 sq m.
d) 23.33 sq m.
Explanation: Average pay = 400+1000/2 = Rs. 700.00 per month.
Average monthly rent @ 10% of salary = 700.00/10 = Rs.70.00
Average annual rent 70.0*12 = Rs.840.00.
Capital cost of the building @ 6%interest = 840*100/6 = Rs.14000.00
Plinth area required @Rs.150.00 per sq m of plinth area = 14000/150 = 93.33 sq m.
Normally the quarter for the assistant engineer should be constructed at the cost of Rs.14000.00 having plinth area of 93.33 sq m.
But due to the increase in the cost of construction, this may be increased by 100% and the capital cost of construction may be fixed as Rs.2800.00 and the approximate plinth area of 93.33.
9. Obsolescence is the annual periodic payments for repayments of the capital amount invested by a party.
Explanation: An annuity is a series of payments made at equal intervals. Examples of annuities are regular deposits to a savings account, monthly home mortgage payments, monthly insurance payments and pension payments. Annuities can be classified by the frequency of payment dates. The payments (deposits) may be made weekly, monthly, quarterly, yearly, or at any other regular interval of time.
An annuity which provides for payments for the remainder of a person’s lifetime is a life annuity.
10. Scrap value is the net annual letting value of a property, which is obtained after deducting the amount of yearly repairs from the gross income.
Explanation: In financial accounting, scrap value is associated with the depreciation of assets used in a business. In this situation, scrap value is defined as the expected or estimated value of the asset at the end of its useful life. Scrap value is also referred to as an asset’s salvage value or residual value.
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