CCE CCE Financial Analysis & Economic Evaluation 1

Question 1

What does the Net Present Value (NPV) method measure in engineering economic analysis?

Accepted Answer

The difference between the present value of cash inflows and outflows

Answer

NPV measures the difference between the present value of all cash inflows and outflows, with a positive NPV indicating a financially acceptable investment.

Question 2

If a project has an Internal Rate of Return (IRR) greater than the Minimum Attractive Rate of Return (MARR), the project is considered:

Accepted Answer

Economically acceptable

Answer

When the IRR exceeds the MARR (also called the hurdle rate), the project generates returns above the company's minimum requirement and is economically acceptable.

Question 3

The Benefit-Cost Ratio (BCR) method recommends project acceptance when BCR is:

Accepted Answer

Greater than or equal to 1.0

Answer

A BCR ≥ 1.0 indicates that the present value of benefits equals or exceeds the present value of costs, making the project economically justified.

Question 4

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

Accepted Answer

Straight-Line

Answer

The Straight-Line depreciation method divides the depreciable cost equally across each year of the asset's useful life.

Question 5

What is 'salvage value' in the context of engineering economic analysis?

Accepted Answer

The estimated market value of an asset at the end of its useful life

Answer

Salvage value is the estimated residual market value of an asset at the end of its useful life, used in depreciation calculations and life-cycle cost analysis.

CCE - Certified Cost Engineer Practice Test

CCE - Certified Cost Engineer Practice Test

CCE CCE Financial Analysis & Economic Evaluation 1