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

Engineering Economics Flashcards

7 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 7 Engineering Economics flashcards as text

  1. A project requires an investment of $200,000 and yields uniform annual revenues. The simple payback period is 5 years. What are the annual revenues?

    Answer: $40,000

    Simple payback = Initial cost / Annual revenue; Annual revenue = 200,000/5 = $40,000.

  2. When using the annual worth (AW) method to compare alternatives with different lives, you should:

    Answer: Compare AW values directly since they are already annualized

    Annual worth is already expressed per year, so alternatives with different lives can be compared directly at their computed AW.

  3. A firm buys equipment for $60,000 with a 5-year MACRS life. The Year 3 MACRS rate is 19.2%. What is the Year 3 depreciation?

    Answer: $11,520

    Year 3 depreciation = 0.192 × $60,000 = $11,520.

  4. Which of the following is an example of an 'opportunity cost'?

    Answer: The foregone return on invested capital used for a project

    Opportunity cost is the benefit foregone by choosing one alternative over the next-best alternative.

  5. A project produces after-tax cash flows of −$50,000 at t=0 and +$15,000 per year for 5 years. The NPV at MARR = 12% is approximately:

    Answer: +$4,071

    NPV = −50,000 + 15,000·(P/A,12%,5) = −50,000 + 15,000·3.605 = −50,000 + 54,075 ≈ +$4,075.

  6. The economic service life of an asset is the age at which the:

    Answer: Annual worth of costs is minimized

    Economic service life is the number of years that minimizes the equivalent uniform annual cost (EUAC) of owning and operating the asset.

  7. In a sensitivity analysis, a project's NPV is most sensitive to which variable if a 10% change in that variable causes the largest NPV change?

    Answer: The variable causing the greatest absolute change in NPV

    Sensitivity is measured by the magnitude of NPV change resulting from a given percentage change in the input variable.