Practice Test GeeksEIT - Engineering in Training Practice Test
← All EIT Flashcard Decks

Engineering Economics Flashcards

6 cards from real EIT practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 6 Engineering Economics flashcards as text

  1. Which depreciation method results in higher depreciation in early years of asset life?

    Answer: Modified Accelerated Cost Recovery System (MACRS)

    MACRS (used for US tax purposes) accelerates depreciation with higher deductions in early years, reducing tax liability sooner.

  2. A benefit-cost ratio (BCR) of 1.5 indicates that:

    Answer: Benefits exceed costs by 50%

    BCR = Benefits/Costs = 1.5 means the project returns $1.50 for every $1.00 invested, a 50% excess of benefits over costs.

  3. The concept of 'time value of money' is based on:

    Answer: Money available now is worth more than the same amount in the future

    Time value of money reflects that money available now can be invested to earn returns, making it worth more than the same amount received later.

  4. In a make-or-buy analysis, which costs should be included?

    Answer: Incremental (marginal) costs only

    Make-or-buy decisions should consider only incremental costs — those that change with the decision — not sunk or fixed costs unaffected by the choice.

  5. What is the future value of $5,000 invested for 10 years at 6% annual compound interest?

    Answer: $8,954

    FV = PV(1+i)ⁿ = 5000(1.06)¹⁰ = 5000 × 1.7908 ≈ $8,954.

  6. Life-cycle cost analysis (LCCA) considers:

    Answer: All costs from acquisition through disposal

    LCCA evaluates the total cost of ownership over an asset's entire life, including design, procurement, operation, maintenance, and disposal.