MOCK TEST - 1_ENGINEERING ECONOMICS

The costs associated with three pieces of comparable equipment are shown below.

At an interest rate of 12% per year, which equipment should be selected and what is the present worth cost saving:

• A, $3429.80

• A, $6570.20

• B, $6570.20

• B, $3429.80

A project has the cashflows shown below.

For an interest rate of 18% compounded monthly, the annual worth of the project is most nearly:

• $9,006

• $1,564

• -$4,246

• -$5,232

A geotechnical engineering company can purchase a used drilling rig for $90,000 and spend $450 per day on operating costs. The drill rig will have a 5-year life with no salvage value. Alternatively, the company can lease a drill rig for $800 per day. How many days per year must the company use the leased drill rig in order to justify its purchase at an interest rate of 8% per year:

• 64

• 72

• 113

• 257

A company is planning to purchase a certain type of equipment for 6 years. Two options are considered. Equipment A has an initial cost of $340,000 and generates a revenue of $72,000 per year while being used. Equipment B has an initial cost of $330,000 and generates a revenue of $60,000 per year for the first 3 years and $80,000 per year for the last 3 years.

For an interest rate of 6%, the present worth of the more profitable alternative is most nearly: 

• $9,920

• $14,046

• $15,520

• $16,845

A company purchases a new equipment purchase for a total cost $45,000 and will last 15 years with a salvage value of $12,000. The cost of money for the company is 2% per month. The monthly benefit required to break even is most nearly:

• $920

• $980

• $1,100

• $1,200

All of the following are nominal interest rates except:

• i = 12% per year, compound quarterly

• i = 12% per year, compounded yearly

• i = 1% per month, compounded weekly

• i = 3% per quarter, compounded monthly

 All of the following are effective interest rates except:

• i = 1% per month

• i = 10% per year, compounded yearly

• i = effective 10% per year, compounded monthly

• i = 8% per year, compounded monthly

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.

A sunk cost is a type of cost that

• changes as the level of output changes in the short run

• has the most impact on profit-making decisions

• should determine the rational course of action in the future

• will not change regardless of the decision

A decrease in tourism due to the partial closure of a National Park would be considered as which of the following in a B/C analysis:

• Cost

• Benefit

• Disbenefit

• Savings