ENGINEERING ECONOMICS QUESTIONS AND VERIFIED
ANSWERS |100% CORRECT | ALREADY GRADED A
SUNK COSTS ARE?
A. External costs
B. Operating and maintenance costs
C. Opportunity Costs
D. Non-recoverable portion of capital costs
E. Costs at the end of an asset's service life Correct Answers Non-
recoverable portion of capital costs
FUNDAMENTAL DIFFERENCE BETWEEN CTF AND CSF IS?
A. CTF is applied to a salvage value of a capital asset while CSF is
applied to the asset's
first cost
B. CTF is applied to the first cost of a capital asset while CSF is applied
to the asset's salvage value
C. CTF is applied to the project's benefits while CSF is applied to the
project's costs
D. CTF is applied to a capital asset's first cost while CSF is applied to
the asset's operating costs
E. Both are applied to a capital asset's first cost depending on the time of
the asset's purchase Correct Answers CTF is applied to the first cost of a
capital asset while CSF is applied to the asset's salvage value
WHICH OF THE FOLLOWING IS THE BEST MEASURE OF A
PROJECT'S RISK?
,A. IRR
B. AW(Project)
C. EV of project's PW with standard dev
D. BCR
E. Market interest rate Correct Answers Benefit-cost ratio
IN ORDER TO CALCULATE CSF, AMONG OTHER THINGS IT IS
NECESSARY TO KNOW...
A. The before-tax interest rate, CCA rate and the tax rate
B. The after-tax interest rate, CCA rate, and the tax rate
C. The after-tax interest rate, the depreciation rate and the tax rate
D. The before-tax interest rate, tax rate and the depreciation rate
E. The after-tax interest rate, external rate of return and tax rate Correct
Answers The after-tax interest rate, CCA rate, and the tax rate
ONE FUNDAMENTAL DIFFERENCE BETWEEN SOCIAL BCA
AND FINANCIAL CASH FLOW ANALYSIS IS?
A. Financial analysis uses social values of costs and benefits while BCA
uses market values
B. Financial analysis takes into account taxes while BCA does not
C. Financial analysis incorporates inflation while BCA does not
D. Financial analysis takes into account time value of money while BCA
does not
,E. Financial analysis uses social discount factor (rate) while BCA uses
market interest rate Correct Answers Financial analysis takes into
account taxes while BCA does not
WHICH OF THE FOLLOWING STATEMENTS IS CORRECT?
A. Inflation rate is the opportunity cost of money
B. Inflation increases the purchasing power of money
C. Inflation rate is given by the CPI
D. CPI is the average price of a fixed basket of consumer goods and
services relative to base year
E. Inflation is a measure of changes in relative prices Correct Answers
CPI is the average price of a fixed basket of consumer goods and
services relative to base year
BREAK-EVEN ANALYSIS IMPLIES THAT:
A. A project's costs are exactly equal to the project's benefits
B. A project's benefits are lower or equal to the project's costs in terms
of present worth
C. A project's benefits are higher than the project's costs in terms of
present worth
D. The present worth of a project is equal to zero
E. The present worth of a project is positive Correct Answers The
present worth of a project is equal to zero
WHICH OF THE FOLLOWING STATEMENTS IS CORRECT?
, A. To account for tax effects it is necessary to multiply first cost by the
CTF
B. To account for tax effects it is necessary to multiply first cost by one
minus capital tax factor
C. To account for tax effects it is necessary to multiply annual savings
by the capital tax factor
D. To account for tax effects it is necessary to multiply annual savings
by one minus capital tax factor
E. To account for tax effects it is necessary to multiply salvage value by
the capital tax factor Correct Answers To account for tax effects it is
necessary to multiply first cost by the CTF
IN GENERAL, AN INCREASE IN SALVAGE VALUE, ________
AND AN INCREASE IN THE INTEREST RATE _____ THE
PRESENT WORTH OF A PROJECT.
A. Increases, decreases
B. Does not affect, decreases
C. Decreases, increases
D. Increases, increases
E. Decreases, decreases Correct Answers Increases, decreases
PROBABILITY OF GUESSING THE CORRECT ANSWER ON A
MULTIPLE-CHOICE TEST IS AN EXAMPLE OF:
A. Subjective probability
B. Relative (frequency) probability
C. Axiomatic probability
ANSWERS |100% CORRECT | ALREADY GRADED A
SUNK COSTS ARE?
A. External costs
B. Operating and maintenance costs
C. Opportunity Costs
D. Non-recoverable portion of capital costs
E. Costs at the end of an asset's service life Correct Answers Non-
recoverable portion of capital costs
FUNDAMENTAL DIFFERENCE BETWEEN CTF AND CSF IS?
A. CTF is applied to a salvage value of a capital asset while CSF is
applied to the asset's
first cost
B. CTF is applied to the first cost of a capital asset while CSF is applied
to the asset's salvage value
C. CTF is applied to the project's benefits while CSF is applied to the
project's costs
D. CTF is applied to a capital asset's first cost while CSF is applied to
the asset's operating costs
E. Both are applied to a capital asset's first cost depending on the time of
the asset's purchase Correct Answers CTF is applied to the first cost of a
capital asset while CSF is applied to the asset's salvage value
WHICH OF THE FOLLOWING IS THE BEST MEASURE OF A
PROJECT'S RISK?
,A. IRR
B. AW(Project)
C. EV of project's PW with standard dev
D. BCR
E. Market interest rate Correct Answers Benefit-cost ratio
IN ORDER TO CALCULATE CSF, AMONG OTHER THINGS IT IS
NECESSARY TO KNOW...
A. The before-tax interest rate, CCA rate and the tax rate
B. The after-tax interest rate, CCA rate, and the tax rate
C. The after-tax interest rate, the depreciation rate and the tax rate
D. The before-tax interest rate, tax rate and the depreciation rate
E. The after-tax interest rate, external rate of return and tax rate Correct
Answers The after-tax interest rate, CCA rate, and the tax rate
ONE FUNDAMENTAL DIFFERENCE BETWEEN SOCIAL BCA
AND FINANCIAL CASH FLOW ANALYSIS IS?
A. Financial analysis uses social values of costs and benefits while BCA
uses market values
B. Financial analysis takes into account taxes while BCA does not
C. Financial analysis incorporates inflation while BCA does not
D. Financial analysis takes into account time value of money while BCA
does not
,E. Financial analysis uses social discount factor (rate) while BCA uses
market interest rate Correct Answers Financial analysis takes into
account taxes while BCA does not
WHICH OF THE FOLLOWING STATEMENTS IS CORRECT?
A. Inflation rate is the opportunity cost of money
B. Inflation increases the purchasing power of money
C. Inflation rate is given by the CPI
D. CPI is the average price of a fixed basket of consumer goods and
services relative to base year
E. Inflation is a measure of changes in relative prices Correct Answers
CPI is the average price of a fixed basket of consumer goods and
services relative to base year
BREAK-EVEN ANALYSIS IMPLIES THAT:
A. A project's costs are exactly equal to the project's benefits
B. A project's benefits are lower or equal to the project's costs in terms
of present worth
C. A project's benefits are higher than the project's costs in terms of
present worth
D. The present worth of a project is equal to zero
E. The present worth of a project is positive Correct Answers The
present worth of a project is equal to zero
WHICH OF THE FOLLOWING STATEMENTS IS CORRECT?
, A. To account for tax effects it is necessary to multiply first cost by the
CTF
B. To account for tax effects it is necessary to multiply first cost by one
minus capital tax factor
C. To account for tax effects it is necessary to multiply annual savings
by the capital tax factor
D. To account for tax effects it is necessary to multiply annual savings
by one minus capital tax factor
E. To account for tax effects it is necessary to multiply salvage value by
the capital tax factor Correct Answers To account for tax effects it is
necessary to multiply first cost by the CTF
IN GENERAL, AN INCREASE IN SALVAGE VALUE, ________
AND AN INCREASE IN THE INTEREST RATE _____ THE
PRESENT WORTH OF A PROJECT.
A. Increases, decreases
B. Does not affect, decreases
C. Decreases, increases
D. Increases, increases
E. Decreases, decreases Correct Answers Increases, decreases
PROBABILITY OF GUESSING THE CORRECT ANSWER ON A
MULTIPLE-CHOICE TEST IS AN EXAMPLE OF:
A. Subjective probability
B. Relative (frequency) probability
C. Axiomatic probability
