Engineering Economics Concept 1

Question 1

Annual amount or worth

Answer 1

A or AW - Equivalent uniform annual worth of all cash inflows and outflows over estimated life (1.7, 6.1).

Question 2

Annual operating cost

Answer 2

AOC - Estimated annual costs to maintain and support an alternative (1.3).

Question 3

Benefit/cost ratio

Answer 3

B/C - Ratio of a project’s benefits to costs expressed in PW, AW, or FW terms (9.2).

Question 4

Breakeven point

Answer 4

QBE - Quantity at which revenues and costs are equal, or two alternatives are equivalent (13.1).

Question 5

Book value

Answer 5

BV - Remaining capital investment in an asset after depreciation is accounted for (16.1).

Question 6

Capital budget

Answer 6

b - Amount of money available for capital investment projects (12.1).

Question 7

Capital recovery

Answer 7

CR or A - Equivalent annual cost of owning an asset plus the required return on the initial investment (6.2).

Question 8

Capitalized cost

Answer 8

CC or P - Present worth of an alternative that will last forever (or a long time) (5.5).

Question 9

Cash flow

Answer 9

CF - Actual cash amounts which are receipts (inflow) and disbursements (outflow) (1.10).

Question 10

Cash flow diagram

Answer 10

A diagram showing the timing and value of cash inflows and outflows, as viewed from one party’s perspective.

Question 11

Cash flow before or after taxes

Answer 11

CFBT or CFAT - Cash flow amount before relevant taxes or after taxes are applied (17.2).

Question 12

Composite rate of return

Answer 12

i’ - Unique rate of return when a reinvestment rate c is applied to a multiple-rate cash flow series (7.5).