CCE Financial Analysis & Economic Evaluation Flashcards
6 cards from real CCE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CCE Financial Analysis & Economic Evaluation flashcards as text
In a sensitivity analysis for a capital investment, which variable is typically tested first?
Answer: The variable to which NPV or IRR is most sensitive
Sensitivity analysis begins by testing the variable that has the greatest impact on the economic measure (NPV or IRR) to identify the most critical assumptions.
The 'break-even analysis' in cost engineering determines the point at which:
Answer: Total revenue equals total costs, resulting in zero profit or loss
Break-even analysis finds the production level or price at which total revenue equals total cost, meaning neither profit nor loss is generated.
Which term describes the cost that remains constant regardless of the level of production or activity?
Answer: Fixed cost
Fixed costs, such as rent, insurance, and depreciation, do not change with the volume of production within a relevant range of activity.
What does the Capital Recovery Factor (CRF) calculate?
Answer: The equivalent annual payment needed to recover a present investment at a given interest rate
The Capital Recovery Factor converts a present sum into an equivalent series of equal annual payments that recover both principal and interest over a specified period.
In economic evaluation of public projects in the US, which discount rate is typically required by the Office of Management and Budget (OMB)?
Answer: OMB Circular A-94 specified real discount rates
OMB Circular A-94 prescribes the discount rates to be used in benefit-cost analyses of federal programs and projects.
What is 'opportunity cost' in engineering economic analysis?
Answer: The return foregone by not investing in the next best alternative
Opportunity cost is the potential return sacrificed by choosing one investment over the next best available alternative.