Chapter 8

Question 1

What is “Engineering Economy”?

Answer 1

A collection of techniques that simplify comparisons of alternatives on an economic basis.

Question 2

Multiple Attribute Analysis

Answer 2

Inclusion of other factors (beside economics) in the decision-making process

Question 3

Alternative

Answer 3

Stand-alone solution for a given situation

Question 4

Alternatives in engineering include:

Answer 4

1. Purchase cost (first cost)
2. Anticipated useful life
3. Annual maintenance and operating costs
4. Salvage value
5. Interest value

Question 5

Alternative of indecisiveness

Answer 5

Do-nothing alternative

Question 6

Cash flows

Answer 6

Estimated inflows (revenues) and outflows of money

Question 7

First cost (capital)

Answer 7

Expense to build or buy and install

Question 8

Operations Maintenance

Answer 8

Annual expenses such as electricity and labor

Question 9

IRP (interest rate paid) is more appropriate for the:

Answer 9

Borrower’s perspective

Question 10

Rate of returned is for the:

Answer 10

Investor’s perspective

Question 11

Economic Equivalence

Answer 11

A combination of interest rate and time value of money

Question 12

MARR

Answer 12

Minimum Acceptable Rate of Return

Question 13

Examples of noneconomic factors:

Answer 13

1. Friendship
2. Morale
3. Goodwill
4. Convenience

Question 14

CFD shows the:

Answer 14

Size, sign, and timing of individual cash flows

Question 15

A CFD is drawn:

Answer 15

Segmented Time-Based Horizontal Line