BSIE Bachelor of Science in Industrial Engineering: Engineering Economics 4

Question 1

A gradient series increases by $500 each year starting in year 2. The gradient present worth factor (P/G, 10%, 5) = 6.862. What is the PW of the gradient alone?

Accepted Answer

$3,431

Answer

PW of gradient = G × (P/G, i, n) = $500 × 6.862 = $3,431.

Question 2

In after-tax economic analysis, the after-tax cash flow (ATCF) is calculated as:

Accepted Answer

BTCF − Taxes

Answer

ATCF = Before-tax cash flow (BTCF) minus taxes owed on taxable income.

Question 3

Economic order quantity (EOQ) minimizes the sum of which two inventory costs?

Accepted Answer

Holding cost and ordering cost

Answer

EOQ balances annual holding (carrying) costs against annual ordering costs to find the minimum total.

Question 4

A geometric gradient has a base cash flow of $2,000 growing at 5% per year for 8 years with i = 10%. The correct present worth formula is:

Accepted Answer

P = A₁ × [(1−(1+g)^n(1+i)^−n)/(i−g)]

Answer

The geometric gradient PW formula adjusts for the growth rate g when i ≠ g.

Question 5

If inflation is 4% and the market (nominal) interest rate is 9%, the real interest rate is approximately:

Accepted Answer

4.8%

Answer

Real rate ≈ (1.09/1.04) − 1 ≈ 4.81%, often approximated as 9% − 4% = 5%.

BSIE - Bachelor of Science in Industrial Engineering Practice Test

BSIE - Bachelor of Science in Industrial Engineering Practice Test

BSIE Bachelor of Science in Industrial Engineering: Engineering Economics 4