MOCK TEST - 2_ENGINEERING ECONOMICS

The three major methods of engineering economic analysis when comparing different alternatives are

• Present worth, future worth, and benefit to cost ratio

• Future worth, expected value, and time series

• Depreciation, expected value, and future worth

• Present worth, equivalent uniform annual worth, and rate of return.

Two methods can be used for producing a certain machine part.  Method A will have a first cost of $60,000 with a $15,000 salvage value after its 3 year life.  The operating cost with this method will be $35,000 per year. Method B will cost $45,000, but it will last only 2 years.  Its salvage value is $10,000 with an operating cost of $25,000 per year.  Using the annual worth and an interest rate of 12% per year, which of the following can be concluded:  

• Method A is less costly than Method B by $5,500

• Method A is less costly than Method B by $8,640

• Method A is more costly than Method B by $8,628

• Method A is more costly than Method B by $5,500

Which of the following will be unaffected by changes in activity level:

• Indirect Cost

• Fixed Cost

• Sunk Cost

• Incremental Cost

A savings and loan offers a 5.25% rate per annum compounded daily over 365 days per year. The effective annual rate is most nearly:

• 0.0539

• 0.0667

• 0.0789

• 0.0456

Suppose your savings account pays 9% interest compounded quarterly. If you deposit $10,000 for one year, how much would you have?

• $20457

• $10931

• $14678

• $19367

A construction company wants to set aside enough money today in an interest-bearing account in order to have $ 100,000 five years from now for the purchase of a replacement piece of equipment. If the company can receive 8% interest on its investment, the amount that should be set aside now to collect the $100,000 five years from now is most nearly:

• $20200

• $38523

• $93232

• $68,060

A contractor wishes to set up a revolving line of credit at the bank to handle her cash flow during the construction of a project. She believes that she needs to borrow $12,000 with which to set up the account, and that she can obtain the money at 1.45% per month. If she pays back the loan and accumulated interest after 8 months, the amount she will have to pay back is most nearly:

• $1,465

• $1,123

• $1,957

• $1,737

For example, if the cash flow in period 1 is $1000, in period 2 it is $1250, in period 3 it is $1500 with the amounts increasing by $250 in each subsequent period. What will be Annual value and Gradient Value:

• A = $1000

  G = $250

• A = $250

  G = $1000

• A = $1500

  G = $1000

• A = $1000

  G = $1500

The rate of return/interest rate for the cash flow below:

• 45.98%

• 55.78%

• 34.97%

• 26.78%

An investment of $50,000 resulted in profits of $10,000 per year for 6 years and $20,000 in year 7.  The rate of return per year was closest to:

• 12.06%

• 15.06%

• 10.06%

• 14.06%