Fundamentals of Engineering Engineering Economics 1

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

The future worth formula F = P(1 + i)ⁿ compounds the present sum at rate i over n periods.

Question 2

What is the breakeven point in engineering economics?

Accepted Answer

The output level where total revenue equals total cost

Answer

The breakeven point is where total revenue equals total cost, resulting in neither profit nor loss.

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

The double declining balance method applies twice the straight-line rate to the book value, giving the highest early depreciation.

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

A positive NPV means the present value of cash inflows exceeds outflows, indicating returns exceed the MARR.

Question 5

What does MARR stand for in engineering economics?

Accepted Answer

Minimum Attractive Rate of Return

Answer

MARR (Minimum Attractive Rate of Return) is the minimum return a project must earn to be considered acceptable.

Fundamentals of Engineering Practice Test