BSE Engineering Economics and Financial Management

Question 1

What does the term 'time value of money' mean in engineering economics?

Accepted Answer

Money available now is worth more than the same amount in the future

Answer

The cost of money increases with inflation only

Answer

Future cash flows are always more valuable than present ones

Answer

Money has no value until invested

Question 2

Which capital budgeting method calculates the discount rate at which an investment's NPV equals zero?

Accepted Answer

Internal Rate of Return (IRR)

Answer

Net Present Value (NPV)

Answer

Payback Period

Answer

Benefit-Cost Ratio

Question 3

A machine costs $50,000 and saves $12,000 per year. What is the simple payback period?

Accepted Answer

4.17 years

Answer

3 years

Answer

4 years

Answer

5 years

Question 4

Which depreciation method allocates an equal amount of cost each year over the asset's useful life?

Accepted Answer

Straight-Line Depreciation

Answer

Double Declining Balance

Answer

Sum-of-the-Years-Digits

Answer

Units of Production

Question 5

In engineering economics, what is the 'MARR'?

Accepted Answer

Minimum Attractive Rate of Return

Answer

Maximum Allowable Rate of Return

Answer

Market Average Rate of Risk

Answer

Marginal Annual Revenue Ratio

Question 6

What is a sunk cost in the context of engineering management decision-making?

Accepted Answer

A cost already incurred and non-recoverable

Answer

A future cost that can be avoided

Answer

A cost that varies with production level

Answer

A fixed overhead cost