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

Annual depreciation = (Cost - Salvage) / Life = ($50,000 - $5,000) / 5 = $9,000.

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

The P/A factor converts a uniform series of payments A to present worth P: P = A × [(1+i)ⁿ - 1] / [i(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

A B/C ratio > 1.0 means the present worth of benefits exceeds costs, justifying the public expenditure.

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

Payback period = Initial cost / Annual cash flow = $100,000 / $25,000 = 4 years.

Question 5

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

Accepted Answer

Fixed cost

Answer

Fixed costs remain constant regardless of production level, unlike variable costs which change with output.

Fundamentals of Engineering Practice Test

Fundamentals of Engineering Practice Test

Fundamentals of Engineering Engineering Economics 2