CCP Economic Analysis and Engineering Economics

Question 1

What does Net Present Value (NPV) represent in project economic analysis?

Accepted Answer

The present value of all future cash inflows minus the present value of all cash outflows

Answer

The total undiscounted cash flows of a project over its life

Answer

The average annual return on investment expressed in today's dollars

Answer

The ratio of discounted benefits to discounted costs

Question 2

Which discount rate makes the Net Present Value (NPV) of a project exactly equal to zero?

Accepted Answer

The Internal Rate of Return (IRR)

Answer

The Minimum Attractive Rate of Return (MARR)

Answer

The Weighted Average Cost of Capital (WACC)

Answer

The risk-free rate

Question 3

A project requires an initial investment of $120,000 and generates $30,000 in net cash flow each year. What is the simple payback period?

Accepted Answer

4 years

Answer

3 years

Answer

5 years

Answer

6 years

Question 4

The 'time value of money' concept in engineering economics is fundamentally based on which principle?

Accepted Answer

A dollar available today is worth more than a dollar available in the future due to its earning potential

Answer

Inflation always erodes the purchasing power of future cash flows

Answer

Future revenues are inherently uncertain and must be discounted for risk

Answer

Interest rates compound over time, increasing the value of savings

Question 5

What is the Present Worth Factor (P/F, i%, n) formula used in engineering economics?

Accepted Answer

1 / (1 + i)^n

Answer

(1 + i)^n

Answer

i(1 + i)^n / [(1 + i)^n - 1]

Answer

[(1 + i)^n - 1] / i

Question 6

What is the Benefit-Cost Ratio (BCR) decision rule for accepting a project?

Accepted Answer

Accept if BCR ≥ 1.0

Answer

Accept if BCR > 0

Answer

Accept if BCR equals the MARR

Answer

Accept if BCR < 1.0

Question 7

The Capital Recovery Factor (A/P, i%, n) in engineering economics is used to:

Accepted Answer

Convert a present sum into an equivalent uniform series of annual payments

Answer

Find the future value of a present lump sum

Answer

Calculate the salvage value of a depreciating asset

Answer

Determine the inflation-adjusted cost of capital