CCP Economic Analysis and Engineering Economics 2

Question 1

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

Accepted Answer

Straight-Line Method

Answer

The straight-line method spreads the depreciable cost (cost minus salvage value) evenly over the useful life, yielding a constant annual depreciation charge.

Question 2

The Modified Accelerated Cost Recovery System (MACRS) is primarily used for:

Accepted Answer

Federal income tax depreciation in the United States

Answer

MACRS is the depreciation system mandated by the U.S. IRS for calculating tax deductions, allowing accelerated write-offs in the early years of asset life.

Question 3

What is the Minimum Attractive Rate of Return (MARR) in engineering economic analysis?

Accepted Answer

The minimum return threshold an organization requires before accepting an investment

Answer

MARR is a management-set threshold reflecting the opportunity cost of capital; projects must earn at least this rate to be economically acceptable.

Question 4

When comparing two mutually exclusive alternatives with different useful lives, the most rigorous approach is to use:

Accepted Answer

The Annual Worth Method or a Least Common Multiple (LCM) study period

Answer

The Annual Worth Method or LCM study period ensures alternatives are compared on an equivalent time basis, avoiding distortion from unequal lifespans.

Question 5

In a public-sector Benefit-Cost Analysis, 'disbenefits' are best described as:

Accepted Answer

Negative consequences or losses experienced by the public due to the project

Answer

Disbenefits are disadvantages or negative impacts borne by the public (not the project sponsor), such as traffic disruption during construction, subtracted from gross benefits.

CCP - Certified Cost Professional Practice Test

CCP - Certified Cost Professional Practice Test

CCP Economic Analysis and Engineering Economics 2