CCE CCE Financial Analysis & Economic Evaluation 3

Question 1

In a sensitivity analysis for a capital investment, which variable is typically tested first?

Accepted Answer

The variable to which NPV or IRR is most sensitive

Answer

Tax rate

Answer

Salvage value

Answer

Depreciation method

Question 2

The 'break-even analysis' in cost engineering determines the point at which:

Accepted Answer

Total revenue equals total costs, resulting in zero profit or loss

Answer

Revenue exceeds costs by 10%

Answer

Fixed costs equal variable costs

Answer

The project reaches its design capacity

Question 3

Which term describes the cost that remains constant regardless of the level of production or activity?

Accepted Answer

Fixed cost

Answer

Variable cost

Answer

Semi-variable cost

Answer

Marginal cost

Question 4

What does the Capital Recovery Factor (CRF) calculate?

Accepted Answer

The equivalent annual payment needed to recover a present investment at a given interest rate

Answer

The present worth of a uniform annual series

Answer

The future value of a lump sum investment

Answer

The total depreciation over an asset's life

Question 5

In economic evaluation of public projects in the US, which discount rate is typically required by the Office of Management and Budget (OMB)?

Accepted Answer

OMB Circular A-94 specified real discount rates

Answer

The prime lending rate

Answer

The federal discount rate

Answer

The project's internal rate of return

Question 6

What is 'opportunity cost' in engineering economic analysis?

Accepted Answer

The return foregone by not investing in the next best alternative

Answer

The direct cost of producing one additional unit

Answer

The cost of an asset's lost value due to depreciation

Answer

The premium paid for accelerated project delivery