Fundamentals of Engineering Engineering Economics

Question 1

What is the formula for the Future Worth (F) of a present sum (P) after n periods at interest rate i?

Accepted Answer

F = P(1 + i)ⁿ

Answer

F = P/(1 + i)ⁿ

Answer

F = P·n·i

Answer

F = P + n·i

Question 2

What is the breakeven point in engineering economics?

Accepted Answer

The output level where total revenue equals total cost

Answer

The output level where profit is maximized

Answer

The minimum production quantity

Answer

The output where fixed costs are recovered

Question 3

Which depreciation method gives the highest depreciation expense in the early years of an asset's life?

Accepted Answer

Double declining balance (DDB)

Answer

Straight-line method

Answer

Sum-of-years-digits (SYD)

Answer

Units of production

Question 4

Net Present Value (NPV) of a project is positive. What does this indicate?

Accepted Answer

The project returns more than the minimum attractive rate of return (MARR)

Answer

The project breaks even

Answer

The internal rate of return equals the MARR

Answer

The payback period is zero

Question 5

What does MARR stand for in engineering economics?

Accepted Answer

Minimum Attractive Rate of Return

Answer

Maximum Allowable Rate of Return

Answer

Mean Annual Rate of Return

Answer

Minimum Acceptable Revenue Ratio

Question 6

Which method of economic comparison finds the interest rate that makes NPV = 0?

Accepted Answer

Internal Rate of Return (IRR)

Answer

Net Present Value (NPV)

Answer

Benefit-Cost Ratio

Answer

Annual Worth method