Engineering Economics

Question 1

A

Answer 1

Annuity or annual

Question 2

BV

Answer 2

Book value

Question 3

EUAC

Answer 3

Equivalent uniform annualized cost

Question 4

EV

Answer 4

Expected value

Question 5

F

Answer 5

Future value

Question 6

f

Answer 6

Inflation rate

Question 7

G

Answer 7

Uniform gradient amount per interest period

Question 8

i

Answer 8

Interest rate per period

Question 9

M

Answer 9

Compound period

Question 10

MACRS

Answer 10

Modified accelerated cost recovery system

Question 11

MARR

Answer 11

Modified attractive rate of return

Question 12

n

Answer 12

Number of compounding periods

Question 13

P

Answer 13

Present value

Question 14

ROI

Answer 14

Return on investment

Question 15

Economics

Answer 15

A social science concerned chiefly with description and analysis of the production, distribution and consumption of goods and services

Question 16

Finance

Answer 16

The science or study of the management of funds

Question 17

Depreciate

Answer 17

To deduct from taxable income a portion of the original cost of (a business asset) over several years as the value of the asset decreases

Question 18

Inflation

Answer 18

A continuing rise in the general price level usually attributed to an increase in in the volume of money and credit relative to available goods and services

Question 19

Fixed cost

Answer 19

A cost that remains constant and does not vary with short term changes in production

Question 20

Variable cost

Answer 20

Cost that fluctuates directly with changes in output

Question 21

Direct labor

Answer 21

Labor (as machine operators) applied directly to a product in the manufacturing process so that the cost is computable, identifiable, and chargeable directly to the specific product

Question 22

Indirect labor

Answer 22

Labor (as clerks, repair men, maintenance men) applied indirectly to a product in the manufacturing process so that the cost is not computable in, identifiable with, or chargeable directly to the specific product

Question 23

Sustainability

Answer 23

Of, relating to, or being a method of harvesting or using a resource so the resource is not depleted or permanently damaged

Question 24

Cash flow diagrams

Answer 24

A method to visualize cash flows over time

Question 25

P Given F, i, n

Answer 25

P=F(1+i)^-n Note that I should be a decimal

Question 26

Non annual compounding

Answer 26

i’ = (1+(r/m))^m-1

Question 27

Inflation

Answer 27

d=i+f+(ixf)

Question 28

Uniform gradient

Answer 28

Another type of cash flow that may be tested - the **uniform gradient amount per interest period** (G)

Question 29

P Given G, i, and n

Answer 29

P’ = G(FIND IN FERH SUPPLIED FACTOR TABLE)

Question 30

Net present value

Answer 30

Question 31

Comparing alternative costs Same i

Answer 31

Lower payback is better P’ = -P + (P/F, i, n) OR P’ = -P + (P/A, i, n)

Question 32

Capitalized costs

Answer 32

The present value of an infinite series of payments, given an interest rate

Question 33

CONCEPT Would an infinite series of payments produce an infinite value?

Answer 33

NO and infinite series of payments will have a FINITE value

Question 34

Capitalized cost Eq

Answer 34

P = A/i

Question 35

Equivalent Uniform Annualized Cost EUAC

Answer 35

When alternatives do the same job but have different life expectancies, they may be compared based on the cost per year of each alternative

Question 36

EUAC

Answer 36

EUAC = P(A/P, i, n) + (per year cost)

Question 37

Cost benefit analysis

Answer 37

B - C >= 0

Question 38

Fixed cost

Answer 38

Fixed costs do not vary with production, such as plant and equipment (overhead) costs

Question 39

Incremental cost

Answer 39

Or marginal costs - vary with production such as material and labor

Question 40

Sunk cost

Answer 40

BAD Throwing good money after bad Feeling committed to something because money was already put in

Question 41

Minimum attractive rate or return (MARR)

Answer 41

Should represent the minimum ROI known

Question 42

Break even analysis

Answer 42

Exactly as it sounds Set Eq(1) = Eq(2) and solve for variable

Question 43

Probabilistic analysis

Answer 43

Given uncertain outcomes but given the probability of possible costs/revenues

Question 44

EV

Answer 44

EV = (C1)(P1) + (C2)(P2) + …

Question 45

Probabilistic analysis ex

Answer 45

* remember to find EV THEN apply P’ = P(P/A, i, n)

Question 46

Straight line depreciation D_j (j = year of depreciation)

Answer 46

D_j = (C-S_n)/n

Question 47

Book value

Answer 47

BV = P - ΣD_j

Question 48

Book value Definition

Answer 48

Represents the portion of assets initial cost that has not yet been used to offset income

Question 49

Given annual rate, compounded monthly

Answer 49

Divide by 12

Question 50

When given an initial amount (A) and an annual increase, or gradient (G), use what to find P

Answer 50

P = A(P/A) + G(P/G)

Question 51

Max investment =

Answer 51

Present worth of benefits (P/A) for difference in cost (ie cost savings)

Question 52

Profit can be found from what two totals

Answer 52

Revenue - cost

Question 53

When inflation is mentioned use

Answer 53

Combined interest rate Can be used for rate of return

Question 54

For the total amount paid on a loan

Answer 54

Convert each payment with (P/F) with inflation rate then take those values and put through (P/F) with interest rate. OR Use inflation Eq for d and use in (P/A) and find closest

Question 55

READ CAREFULLY

Answer 55

Dumbass

Question 56

When asking for depreciation value give the

Answer 56

Amount of decrease NOT total amount after decrease

Question 57

Present value of a bond

Answer 57

P = A(P/A) + F(P/F) Where F is the value of the bond

Question 58

Cost of bonds

Answer 58

= A(P/A) + F(P/F)

Question 59

Annual interest payments for bonds

Answer 59

Interest rate * bond worth

Question 60

Rate of return investment for bonds?

Answer 60

Guess and check until cost = what bond was bought for

Question 61

When given a table for schedule of funds use this

Answer 61

F = ΣP(1+i)^n Add every iteration for n

Question 63

Tax savings from depreciation

Answer 63

Depreciation value * tax rate

Question 64

Annual net cash flow

Answer 64

Cash flow from ops - income taxes - income taxes

Question 65

Income taxes

Answer 65

(cash inflow - ops cost)*tax rate - tax savings from depreciation