Cash Flow and Life Cycle Cost Analysis

Question 1

Principle 1 of the fundamental principles of engineering economics states that:

Answer 1

A nearby dollar is worth more than a distant dollar.

Question 2

Which of these is not included in the Life Cycle Cost?

Answer 2

a. Energy Costs
b. Down Time Costs
* c. Accounting Costs
d. Initial Costs

Question 3

The benefit-cost analysis is commonly used to evaluate ________.

Answer 3

Public Projects

Question 4

Represents time by a horizontal line marked off with the number of interest periods specified is what?

Answer 4

Cash Flow Diagram

Question 5

What is commonly used to evaluate public projects?

Answer 5

Benefit-Cost Analysis

Question 6

Step 1 of the Framework of Benefit-Cost Analysis states you must identify the (blank) and (blank) of the project. Which two words belong in this statement?

Answer 6

Users, sponsers

Question 7

The benefit cosyt analysis is commonly used to evaluate

Answer 7

public projects

Question 8

Which of the following is not a basic concept of engineering economy?

Answer 8

a. cash flow
b. interest rate and time value of money
c. equivalence technique
* d. LIFO

Question 9

According to our notes, all of the following is true concerning difficulties involved in public project analysis

Answer 9

a. Identifying all the benefits and disbenefits of the project
b. Quantifying all benefits and disbenefits in dollars or some other unit of measure
d. Identifying all the users who can benefit from the project

Question 10

Which dectermines how frequently interest is calculated?

Answer 10

Interest Period

Question 11

What are the two fundamental costs associated wih the life-cycle cost analysis?

Answer 11

Non-recurring and Recurring Costs

Question 12

How would you calculate the future value of $20,000 with 4% interest in 5 years.

Answer 12

20000*(1.04)^5

Question 13

What is the second step in the Benefit-Cost Analysis?

Answer 13

Identifying all the benefits and disbenefits

Question 14

How many stages are there in the Life Cycle of a product?

Answer 14

5

Question 15

_____ is for evaluating past performance and _____ is for predicting future needs.

Answer 15

Accounting; Economics engineering

Question 16

Quantifying all benefits and disbenefits in dollars or some other unit of measure is which step in the benefit-cost analysis?

Answer 16

3rd

Question 17

How many phases are there in a life cycle?

Answer 17

5

Question 18

What deals with the concepts and techniques of analysis useful in evaluating the worth of systems, products, and services in relation to their cost?

Answer 18

Engineering Economy

Question 19

The definition of principle is

Answer 19

the intial amount of money in transactions involving debt or investments

Question 20

Engineering Economy

Answer 20

Deals with the concepts and techniques of analysis useful in evaluating the worth of system, products, and services in relation to their costs.

Question 21

Types of Decisions

Answer 21

Service Improvement
Equipment and process selection
Equipment Replacement
New product and product expansion
Cost Reduction

Question 22

Principle 1:

Answer 22

A nearby dollar is worth more than a distant dollar.

Question 23

Principle 2:

Answer 23

all it counts is the differences amoung alternatives.

Question 24

Principle 3:

Answer 24

Marginal revenue must exceed marginal cost

Question 25

Principle 4:

Answer 25

Additional risk is not taken without the expected additional return.

Question 26

Categories of Cash Flows:

Answer 26

First Cost
Operations and Maintenance
Salvage Value
Revenues
Overhaul

Question 27

Total Interest Earned:

Answer 27

I = (iP)N

Question 28

Total amount at end of period:

Answer 28

F = P + I = P(1+iN)

Question 29

Stages of Life Cycle Cost:

Answer 29

Concept refinement and technolody development.
System development and demonstration.
Production and development.
Operating and support.
Phasing out operation.

Question 30

LCC Elements

Answer 30

Initial costs
Installation cost
Energy Cost
Operation Costs
Maintenance Cost
Down Time Cost
Environmental Cost
Decommission/Disposal Cost

Question 31

Benefit-cost Analysis

Answer 31

Benefits of a nonmonetary nature need to be quantified in dolalr terms as much as possible and factored into the analysis.

Question 32

Framework of Benefit-cost Analysis

Answer 32

Identifying sponsors
Identifying all benefits
Quantifying benefits
Selecting interest rate

Question 33

If the BC ratio exceeds ___, the project can be justified.

Answer 33

1

Question 34

______ is interest earned on only the principal amount during each interest period.

Answer 34

Simple interest

Question 35

Is it more beneficial financially if you can get 5% return on investment?

Answer 35

Receive a lump sum of $167 thousand at one time

Question 36

Which of the following Benefit-Cost Ratios would justify a public project?

Answer 36

1.2

Question 37

Which of the following best describes the last step (step 4) in the Framework of Benefit-Cost Analysis?

Answer 37

Selecting an appropriate interest rate at which to discount benefits and costs in future to a present value.

Question 38

Which of the following is the correct definition of Present Value?

Answer 38

The amount that a future sum of money is worth today, given a specified rate of return

Question 39

When dealing with categories of cash flows, what best describes “salvage value”?

Answer 39

Receipt at project termination for sale or transfer of the equipment.

Question 40

Principle 3 of the Fundamental Principles of Engineering Economics states that:

Answer 40

marginal revenue must exceed marginal cost