Test Bank for Engineering Economics Financial Decision Making for Engineers, 6th Edition

Name: Test Bank for Engineering Economics Financial Decision Making for Engineers, 6th Edition
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Test Bank for Engineering Economics Financial Decision Making for Engineers, 6th Edition provides in-depth questions and solutions to reinforce key concepts. Start practicing today!

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Engineering Economics, 5e (Fraser)
Chapter 1 Engineering Decision Making
1.1 Multiple Choice Questions
1) Evaluation of an engineering project involves the following constraints:
A) financial, environmental, social and political constraints.
B) technical and financial constraints.
C) technological and social constraints.
D) time and money constraints.
E) budget and time constraints.
Answer: A
Diff: 1 Type: MC Page Ref: 3
Topic: 1.1. Engineering decision making
Skill: Recall
User1: Qualitative
2) Engineering economics is
A) a body of knowledge to determine which of several alternative is technically best.
B) a collection of techniques for quantitative analysis to select a preferable alternative from several
technically viable ones.
C) a set of tools to calculate an engineering project's costs.
D) a set of rules to evaluate an engineering project.
E) a set of methods to determine an engineering project's costs in terms of time value of money.
Answer: B
Diff: 1 Type: MC Page Ref: 3
Topic: 1.2. What is engineering economics
Skill: Recall
User1: Qualitative
3) From an economic standpoint, any engineering project can be thought of in terms of
A) its costs and benefits over time.
B) its constraints.
C) its receipts and disbursements.
D) its revenues and profits over time.
E) its investment and costs over time.
Answer: A
Diff: 1 Type: MC Page Ref: 3
Topic: 1.2. What is engineering economics
Skill: Recall
User1: Qualitative

4) In the context of your textbook, abstraction means
A) a study.
B) a method
C) a methodology
D) a model.
E) an approach
Answer: D
Diff: 1 Type: MC Page Ref: 6
Topic: 1.4. Dealing with abstractions
Skill: Recall
User1: Qualitative
5) When an engineer prepares a feasibility study, what economic information must she possess in order
to do it correctly?
A) engineering specification
B) expert opinion about this project
C) macroeconomic situation in the world
D) potential future costs and benefits of the project
E) the level of uncertainty
Answer: D
Diff: 2 Type: MC Page Ref: 6
Topic: 1.4. Dealing with abstractions
Skill: Applied
User1: Qualitative
6) In which of the following problems do you need engineering economics?
A) to choose a course in your program
B) to chose the right textbook
C) to decide whether to borrow money from parents or from a bank
D) to decide whether or not to buy a car
E) to decide where to spend summer vacation
Answer: C
Diff: 2 Type: MC Page Ref: 6-8
Topic: 1.4. Dealing with abstractions
Skill: Applied
User1: Qualitative
7) Which of the following statements best describes the moral issues faced by engineers while
evaluating projects?
A) moral issues are clearly defined in engineering design
B) moral issues do not matter as long as technical goals are achieved
C) your employer is the only person who can define what is ethical or unethical
D) there are no general answers to moral questions
E) since moral issues are value judgements they must not be taken into consideration
Answer: D
Diff: 3 Type:

evaluation is
A) to ask your friends.
B) to consult professional engineering associations.
C) to search the web.
D) to read newspapers.
E) to read professional textbooks.
Answer: B
Diff: 2 Type: MC Page Ref: 9-10
Topic: 1.5. The moral question: Three true stories
Skill: Recall
User1: Qualitative
9) Stan borrowed $5 000 one year ago. Now he has to repay $5 100. The interest Stan pays is
A) $5 100
B) 102%
C) $100
D) 2%
E) $5 000
Answer: C
Diff: 2 Type: MC Page Ref: 6-8
Topic: 1.4. Dealing with abstractions
Skill: Applied
User1: Quantitative
10) Joan borrowed $1 000 one year ago. Now she has to repay $1 100. Therefore, the interest rate she
pays is
A) $1 000
B) $1 100
C) $100
D) 110%
E) 10%
Answer: E
Diff: 2 Type: MC Page Ref: 6-8
Topic: 1.4. Dealing with abstractions
Skill: Applied
User1: Quantitative
11) All but one of the following are economic criteria to evaluate an engineering project. Which one is
the non-economic criterion?
A) maximum profit
B) minimum cost
C) minimum pollution
D) maximum rate of return
E) minimum payback period
Answer: C

A) extrapolation.
B) risk.
C) precise description.
D) abstraction.
E) expected scenario.
Answer: B
Diff: 2 Type: MC Page Ref: 11
Topic: 1.6. Uncertainty, sensitivity analysis, and currencies
Skill: Applied
User1: Qualitative
13) To resolve uncertainty, engineers apply
A) marginal analysis.
B) cash-flow analysis.
C) sensitivity analysis.
D) risk analysis.
E) economic impact analysis.
Answer: C
Diff: 2 Type: MC Page Ref: 11
Topic: 1.6. Uncertainty, sensitivity analysis, and currencies
Skill: Recall

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15) Suppose that you want to buy a used car for $3 000, but you don't have enough cash. List some of
the (legal) strategies that you might consider.
Answer: Possible alternatives for financing the purchase of a used car are:
- Not to buy (a "do nothing" alternative);
- To borrow money from your parents;
- To take a loan from a commercial bank;
- To finance through a car dealer;
- To postpone the purchase and earn money working extra hours.
Diff: 2 Type: SA Page Ref: 3-6
Topic: 1.3. Making decisions
Skill: Applied
User1: Qualitative

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7) Nominal interest rate is calculated by
A) summing up all interest rates for all compounding periods.
B) converting a given interest rate with a compounding period to an equivalent interest rate with a one-
year compounding period.
C) dividing the interest rate per compounding period by the number of compounding periods per year.
D) multiplying the simple interest rate by the number of years.
E) multiplying the interest rate per compounding period by the number of compounding periods per
year.
Answer: E
Diff: 2 Type: MC Page Ref: 26
Topic: 2.4 Effective and Nominal Interest Rates
Skill: Recall
User1: Qualitative
8) Your credit card statement says that your card charges 0.0562% interest per day. What is the actual
interest rate per year?
A) 11.6%
B) 14.5%
C) 18.3%
D) 20.1%
E) 22.8%
Answer: E
Diff: 2 Type: MC Page Ref: 26

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13) J.D.Irving Ltd. is considering a construction project with $2 million initial investment that will last
for 10 years. The duration of the construction phase is one year. Once the construction is over, the
project starts yielding a constant annual revenue of $1.0 million. By the end of the fifth year the project
generates $0.5 million extra revenue. The annual operation and maintenance expenses of $0.5 million
will start at year four and last till the end of the project's life. At the very end of the 10-year project the
used equipment can be sold for $1.5 million. What cash flow diagram represents this project?
A)
B)
C)
D)

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E)
Answer: B
Diff: 3 Type: MC Page Ref: 29-31
Topic: 2.6 Cash Flow Diagrams
Skill: Applied
User1: Quantitative
14) What does the term "market equivalence" imply?
A) indifference on the part of a decision maker among available choices
B) the existence of a mathematical relationship between time and money
C) the ability to exchange one cash flow for another at minimum cost
D) the ability to exchange one cash flow for another at no cost
E) the ability to obtain a zero net cash flow
Answer: A
Diff: 2 Type: MC Page Ref: 32
Topic: 2.7 Equivalence
Skill: Recall
User1: Qualitative
15) You invest $10 000 at 5% interest rate compounded monthly, what is your accumulated interest at
the end of year 2?

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19) If you borrow $2 000 today at 20% interest rate for 5 years, what is your simple interest in this case?
A) $2 000
B) $4 000
C) $4 976.64
D) $976.64
E) $2 976.64
Answer: A
Diff: 1 Type: MC Page Ref: 24
Topic: 2.3 Compound and Simple Interest
Skill: Applied
User1: Quantitative
20) COSCO invested $5.5 million in a project ten years ago. As of today the worth of this project is
$24.9 million. What annual interest rate has the project been earning if interest is compounded monthly?
A) 14.2%
B) 14.8%
C) 15.2%
D) 15.8%
E) 16.2%
Answer: C
Diff: 3 Type: MC Page Ref: 27
Topic: 2.4 Effective and Nominal Interest Rates

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Test Bank for Engineering Economics Financial Decision Making for Engineers, 6th Edition

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