Economics Flashcards
Ptot Costs=
Pinitial+Pmain-Psalvage. Find P/A for maintenance, and P/F for salvage.
Breakeven Point (BEP)
Total cost = Total Revenue
Explain the concept of the time value of money and its importance in engineering economic analysis.
The time value of money is the principle that the value of a sum of money changes over time due to factors such as interest and inflation, and it is crucial in engineering economic analysis as it allows for the comparison of cash flows occurring at different points in time by converting them to a common basis.
Discuss the factors that contribute to the time value of money.
The time value of money is influenced by factors such as interest rates, inflation, and the opportunity cost of capital, reflecting the changing worth of money over time in economic decision-making.
Discuss the advantages and limitations of the rate of return method.
The rate of return method offers a straightforward measure of profitability but has limitations, including potential multiple rates of return and a tendency to prioritize smaller projects, making it essential to consider its appropriateness for specific economic evaluations.
Define benefit-cost ratio and explain its interpretation.
The benefit-cost ratio is a financial metric calculated by dividing the present value of project benefits by the present value of project costs, and its interpretation involves values greater than 1 indicating economic feasibility, with higher ratios signifying more favorable investment returns.
Discuss the factors that should be considered when conducting a benefit-cost analysis.
When conducting a benefit-cost analysis, factors such as accurate estimation of project costs and benefits, consideration of intangible and indirect effects, appropriate discount rates, and the inclusion of a comprehensive range of stakeholders must be carefully evaluated to ensure a robust and meaningful economic assessment.
Discuss the critical path method (CPM) and its application in project scheduling.
The Critical Path Method (CPM) is a project scheduling technique that identifies the sequence of activities with the longest duration, determining the minimum project completion time and highlighting tasks critical for timely project delivery.
Explain the concept of float and its significance in project management.
Float, also known as slack, is the total time a non-critical path activity can be delayed without delaying the project completion date, and its significance lies in providing flexibility for scheduling and managing resources within a project.
Define risk and uncertainty in the context of engineering projects.
Risk in engineering projects refers to the quantifiable probability and potential impact of adverse events or deviations from expected outcomes, while uncertainty represents the broader, qualitative lack of knowledge or predictability regarding future events or project conditions.
Discuss strategies for mitigating and managing project risks.
Strategies for mitigating and managing project risks include thorough risk identification and assessment, contingency planning, regular monitoring and reassessment, and effective communication among project stakeholders to ensure timely response and adaptation to potential challenges.
