01 ECD W04

Engineering Economic Analysis is most suitable for .....

• Simple problems

• Intermediate problems

• Complex problems

• All types of problems

An example of an intermediate problem.

• Should I marry A or B?

• Should I invest in a 7 Nano chip making plant in Singapore?

• Should I lease or buy a new motorbike?

• Should I pay my lunch by PAYNOW or cash?

Youi are given the choice in taking a loan. Which one will you choose?

• Simple interest rate of 3%

• Compound interest rate of 3%

• Effective interest rate of 3%

If the interest rate is 5% compounded annually, the effective interest rate will be ..... than 5%.

• equal to

• less than

• more than

You need to take a loan from the bank. The bank offers 3 different options. Which one is likely to be unfavourable to you?

• Simple interest, pay all at the end

• Compound interest, pay all at the end

• Simple interest paid annually, principal repaid at the end

The best investment plan amongst alternatives look for .....

• lowest capital outlay

• highest salvage value

• minimal negative cash outflow

• highest net present worth

This is the standard assumption for this module.

• start-of-period cash flow

• mid-of-period cash flow

• end-of-period cash flow

This formula wil calculate how long does it take for a certain amount to double in magnitude if the interest is 3% compounded annually.

• 2 = 1 * (P/F, 3%, N)

• 4 = 2 * (F/P, 3%, N)

• 4 = 2 * (P/F, 3%, N)

• 2 = 1 * (F/P, 3%, N)

An annual cash flow of 10 years .....

• begins at start of period 1

• begins at end of period 1

• has 9 equal cash flows

• has 10 equal cash flows

The correct Interest Factor Notation formula to find the future value for $100, interest of 5%, N of 8 years:

• F = 100 * (1+5%)^8

• F = 100 * (F/P, 5%, 8)

• F = 100 * (F/P, 8%, 5)