EIT Engineering Economics

Question 1

What is the present value of $10,000 received in 5 years at a discount rate of 8%?

Accepted Answer

$6,806

Answer

PV = FV/(1+i)ⁿ = 10000/(1.08)⁵ = 10000/1.469 ≈ $6,806.

Question 2

Which method computes the rate of return at which the net present value of a project equals zero?

Accepted Answer

Internal Rate of Return (IRR)

Answer

The Internal Rate of Return (IRR) is the discount rate at which NPV = 0, representing the project's effective return.

Question 3

In engineering economics, what does MARR stand for?

Accepted Answer

Minimum Acceptable Rate of Return

Answer

MARR (Minimum Acceptable Rate of Return) is the minimum return a company requires before approving an investment.

Question 4

Depreciation using the straight-line method distributes the cost:

Accepted Answer

Equally over the useful life

Answer

Straight-line depreciation spreads the cost minus salvage value equally across each year of the asset's useful life.

Question 5

What is the capital recovery factor (A/P, i, n) used to calculate?

Accepted Answer

Uniform annual payment equivalent to a present sum

Answer

The capital recovery factor converts a present sum P into an equivalent uniform annual payment A over n periods at rate i.

EIT - Engineering in Training Practice Test