Engineering Economy FINAL EXAM
QUESTIONS
2025/2026 WITH CORRECT DETAILED
ANSWERS ALREADY GRADED A+
<RECENT VERSION>
What is engineering economy? - ANSWER introduces the decision-making
process that accompanies "go/no go" evaluations of investments in engineering
projects
Purpose of engineering economy? - ANSWER Develop and illustrate the
principles and methodology required to answer basic economic questions of any
design. Do the benefits exceed the cost
Solutions to engineering problems (5) - ANSWER -demonstrate positive
balance of long term benefits over longterm costs
-promote well-being and survival of an organization
-embody creative and innovative technology and ideas
-permit identification and scrutiny of estimated outcomes
-translate profitability to the "bottom line" through a valid and acceptable measure
of merit
, Mission of engineering economy - ANSWER balance trade-offs in the most
economical manner
7 Principles of engineering economy - ANSWER - Develop the alternatives
-Focus on the differences
-Use a consistent viewpoint
-Use a common unit of measure
-Consider all relevant criteria
-Make Risk and Uncertainty Explicit
-Revisit your decisions
Principle 1: Develop the Alternatives - ANSWER Carefully define the problem!
Then the decision is among the alternatives. Alternatives need to be identified and
then defined for analysis
Principle 2: Focus on the differences - ANSWER Only the differences in the
expected future outcomes among alternatives are relevant to their comparison and
should be considered in the decision
Principle 3: Use a consistent viewpoint - ANSWER The prospective outcomes
of the alternatives, economic or other, should be consistently developed from a
defined perspective
Principle 4: Use a common unit of measure - ANSWER Using a common unit
of measurement to list as many of the prospective outcomes will simplify the
analysis of the alternatives
, Principle 5: Consider all relevant criteria - ANSWER Selection of a preferred
alternative requires the use of a criterion. The decision process should consider
both the outcomes enumerated in the monetary unit and those expressed in some
other unit of measurement or made explicit in a descriptive manner
Principle 6: Make risk and Uncertainty explicit - ANSWER Risk and
uncertainty are inherent in estimating the future outcomes of the alternatives and
should be recognized in the analysis and comparison
Principle 7: Revisit your decisions - ANSWER Improved decision-making
results from an adaptive process; to the extent practicable, the initial projected
outcomes of the selected alternative should be subsequently compared with actual
results achieved
Engineering economy focuses on comparing costs and benefits to choose the most
economically efficient alternative. - ANSWER True
If the net benefit of a project is greater than zero, the project is considered
economically viable. - ANSWER True
A cash flow diagram visually represents inflows and outflows of money over time.
- ANSWER T
In a cash flow diagram, money spent is usually represented by arrows pointing
upward. - ANSWER F
, The present worth method converts future cash flows into equivalent value today. -
ANSWER T
A perpetuity is a series of equal payments that continues forever. - ANSWER T
The present worth of a perpetuity is calculated using P = A/i - ANSWER T
If the interest rate increases, the present worth of future payments increases. -
ANSWER F
A cost index is used to estimate the current cost of an item using historical price
data. - ANSWER T
In engineering economics, benefits represent the gains achieved from a project,
while costs represent resources spent. - ANSWER T
A uniform series means equal payments occurring at equal time intervals. -
ANSWER T
In a cash flow diagram, year 0 represents the present. - ANSWER T
If the first payment of a perpetuity starts in year 2, the perpetuity formula gives the
value at year 1. - ANSWER T
QUESTIONS
2025/2026 WITH CORRECT DETAILED
ANSWERS ALREADY GRADED A+
<RECENT VERSION>
What is engineering economy? - ANSWER introduces the decision-making
process that accompanies "go/no go" evaluations of investments in engineering
projects
Purpose of engineering economy? - ANSWER Develop and illustrate the
principles and methodology required to answer basic economic questions of any
design. Do the benefits exceed the cost
Solutions to engineering problems (5) - ANSWER -demonstrate positive
balance of long term benefits over longterm costs
-promote well-being and survival of an organization
-embody creative and innovative technology and ideas
-permit identification and scrutiny of estimated outcomes
-translate profitability to the "bottom line" through a valid and acceptable measure
of merit
, Mission of engineering economy - ANSWER balance trade-offs in the most
economical manner
7 Principles of engineering economy - ANSWER - Develop the alternatives
-Focus on the differences
-Use a consistent viewpoint
-Use a common unit of measure
-Consider all relevant criteria
-Make Risk and Uncertainty Explicit
-Revisit your decisions
Principle 1: Develop the Alternatives - ANSWER Carefully define the problem!
Then the decision is among the alternatives. Alternatives need to be identified and
then defined for analysis
Principle 2: Focus on the differences - ANSWER Only the differences in the
expected future outcomes among alternatives are relevant to their comparison and
should be considered in the decision
Principle 3: Use a consistent viewpoint - ANSWER The prospective outcomes
of the alternatives, economic or other, should be consistently developed from a
defined perspective
Principle 4: Use a common unit of measure - ANSWER Using a common unit
of measurement to list as many of the prospective outcomes will simplify the
analysis of the alternatives
, Principle 5: Consider all relevant criteria - ANSWER Selection of a preferred
alternative requires the use of a criterion. The decision process should consider
both the outcomes enumerated in the monetary unit and those expressed in some
other unit of measurement or made explicit in a descriptive manner
Principle 6: Make risk and Uncertainty explicit - ANSWER Risk and
uncertainty are inherent in estimating the future outcomes of the alternatives and
should be recognized in the analysis and comparison
Principle 7: Revisit your decisions - ANSWER Improved decision-making
results from an adaptive process; to the extent practicable, the initial projected
outcomes of the selected alternative should be subsequently compared with actual
results achieved
Engineering economy focuses on comparing costs and benefits to choose the most
economically efficient alternative. - ANSWER True
If the net benefit of a project is greater than zero, the project is considered
economically viable. - ANSWER True
A cash flow diagram visually represents inflows and outflows of money over time.
- ANSWER T
In a cash flow diagram, money spent is usually represented by arrows pointing
upward. - ANSWER F
, The present worth method converts future cash flows into equivalent value today. -
ANSWER T
A perpetuity is a series of equal payments that continues forever. - ANSWER T
The present worth of a perpetuity is calculated using P = A/i - ANSWER T
If the interest rate increases, the present worth of future payments increases. -
ANSWER F
A cost index is used to estimate the current cost of an item using historical price
data. - ANSWER T
In engineering economics, benefits represent the gains achieved from a project,
while costs represent resources spent. - ANSWER T
A uniform series means equal payments occurring at equal time intervals. -
ANSWER T
In a cash flow diagram, year 0 represents the present. - ANSWER T
If the first payment of a perpetuity starts in year 2, the perpetuity formula gives the
value at year 1. - ANSWER T
