BSIE Bachelor of Science in Industrial Engineering: Engineering Economics 5

Question 1

A firm's weighted average cost of capital (WACC) is often used as:

Accepted Answer

The minimum attractive rate of return (MARR)

Answer

WACC represents the blended cost of all financing sources and is a common basis for setting the MARR.

Question 2

An industrial engineer applies break-even analysis and finds Q_BE = 4,000 units. If expected demand is 3,500 units, the project:

Accepted Answer

Operates at a loss

Answer

Operating below the break-even quantity means total revenue is less than total cost, resulting in a loss.

Question 3

Which of the following correctly describes the relationship between the capital recovery cost (CR) and annual worth (AW)?

Accepted Answer

AW = CR + AW of operating costs

Answer

The total AW of an alternative equals its capital recovery cost plus the annual worth of all operating expenses.

Question 4

In the MACRS 5-year property class, what percentage is depreciated in year 1 (half-year convention)?

Accepted Answer

20%

Answer

Under MACRS, 5-year property uses a 200% declining balance; year 1 rate is 20% due to the half-year convention.

Question 5

Monte Carlo simulation in engineering economics is used to:

Accepted Answer

Model the probability distribution of economic outcomes by sampling random inputs

Answer

Monte Carlo simulation repeatedly samples uncertain input distributions to produce a distribution of possible NPVs or IRRs.

BSIE - Bachelor of Science in Industrial Engineering Practice Test