Fundamentals of Engineering Engineering Economics 2

Question 1

In straight-line depreciation, what is the annual depreciation for an asset costing $50,000 with a salvage value of $5,000 and useful life of 5 years?

Accepted Answer

$9,000

Answer

$10,000

Answer

$8,000

Answer

$45,000

Question 2

What is the uniform series present worth factor (P/A, i%, n)?

Accepted Answer

[(1+i)ⁿ - 1] / [i(1+i)ⁿ]

Answer

[i(1+i)ⁿ] / [(1+i)ⁿ - 1]

Answer

[(1+i)ⁿ - 1] / i

Answer

1 / (1+i)ⁿ

Question 3

A benefit-cost (B/C) ratio greater than 1.0 for a public project indicates:

Accepted Answer

Benefits exceed costs and the project is economically justified

Answer

The project is too expensive

Answer

Costs exceed benefits

Answer

The project has no economic value

Question 4

What is the payback period for a project with an initial cost of $100,000 and uniform annual net cash flow of $25,000?

Accepted Answer

4 years

Answer

5 years

Answer

3 years

Answer

2.5 years

Question 5

Which cost does NOT change with the level of production or output?

Accepted Answer

Fixed cost

Answer

Variable cost

Answer

Marginal cost

Answer

Average cost

Question 6

If the inflation rate is 4% and the market interest rate is 9%, what is the approximate real interest rate?

Accepted Answer

~4.8%

Answer

~13%

Answer

~5%

Answer

~2.25%