Engineering Economics (Khawla)

Complete the following:

P (present equivalent value) occurs ..........................................

• one interest period after the first A (uniform amount)

• one interest period before the first A (uniform amount)

• at the same time as the last A, and N periods after P

• at the end of periods 1 through N, inclusive

If you have $100 today, what is the future equivalent in 5 years, if the annual interest rate is 12%?

• $56.74

• $140.96

• $120

• $176.23

For a project to be economically justified, the present worth must be greater than or equal to 0 for i=MARR.

• True

• False

The total cost of starting Project K is $100,000. The project is expected to yield a profit of $7,000 annually. Find the future worth after 5 years, if the interest rate is 10% per year.

• -$88,950.8

• $166,309.2

• -$166,309.2

• -$167,600

Which of the following statements about Rule 1 and Rule 2 are correct? Select all that apply.

• When revenues and other economic benefits are present and vary among the alternatives, the alternative that minimizes overall profitability is chosen. This is called Rule 2.

• When revenues and other economic benefits are not present or are constant among the alternatives, only the costs are considered and the alternative that minimizes the total cost is chosen. This is called Rule 1.

• When revenues and other economic benefits are present and vary among the alternatives, the alternative that maximizes overall profitability is chosen. This is called Rule 1.

• When revenues and other economic benefits are not present or are constant among the alternatives, only the costs are considered and the alternative that minimizes the total cost is chosen. This is called Rule 2.

When selecting among two alternatives: in the coterminated assumption, the study period of one alternative is repeated to obtain a study period equal to the other alternative.

• True

• False

Whether you use the Present Worth method, the Annual Worth method, or the future worth method, the conclusion should be the same.

• True

• False

Find the conventional B-C ratio for the following project:

The construction of a bridge costs $1,000,000. The bridge requires an annual maintenance of $200,000. The annual benefits are estimated to be $3,000,000. The study period is 20 years and the interest rate is 8% per year.

• 9.99

• 4.13

• 7.22

• 8.60

Depreciation is the increase in value of physical properties with the passage of time and use.

• True

• False

A device costs $20,000. After 7 years, it is expected to be worth $6,000. Using the SL method, find the annual depreciation amount.

• $14,000

• $1,085

• $2,000

• $3,714