CPE CPE Project Management & Engineering Economics 1

Question 1

What does the term 'net present value' (NPV) mean in engineering economics?

Accepted Answer

The current worth of all future cash flows discounted at a required rate of return

Answer

NPV discounts all future project cash flows to the present using a required rate of return; a positive NPV indicates the project adds value.

Question 2

In a capital project, what is a 'Work Breakdown Structure' (WBS)?

Accepted Answer

A hierarchical decomposition of the project scope into manageable deliverables and work packages

Answer

A WBS divides total project scope into smaller, controllable components to facilitate planning, cost estimating, and progress tracking.

Question 3

What is the 'critical path' in project scheduling?

Accepted Answer

The longest sequence of dependent tasks that determines the minimum project duration

Answer

The critical path is the longest chain of dependent activities; any delay on the critical path directly extends the overall project finish date.

Question 4

Which contract type places the greatest financial risk on the contractor?

Accepted Answer

Lump-sum (fixed-price) contract

Answer

In a lump-sum contract the contractor agrees to complete the scope for a fixed price, bearing the risk of cost overruns if actual costs exceed the bid.

Question 5

What is 'straight-line depreciation' for a capital asset?

Accepted Answer

Distributing the asset's cost evenly over its useful life in equal annual amounts

Answer

Straight-line depreciation divides the depreciable cost (purchase price minus salvage value) equally across each year of the asset's expected useful life.

(CPE) Certified Plant Engineer Practice Test

(CPE) Certified Plant Engineer Practice Test

CPE CPE Project Management & Engineering Economics 1