Ch01
Student: ___________________________________________________________________________
1. An example of an intangible factor is
A. Taxes
B. Cost of materials
C. Morale
D. Rent
2. The time it would take for money to double at a simple interest rate of 5% per year is closest to
A. 10 years
B. 12 years
C. 15 years
D. 20 years
3. At a compound interest rate of 10% per year, $10,000 one year ago is now equivalent to
A. $8,264
B. $9,091
C. $11,000
D. $12,100
4. An investment of $10,000 nine years ago has accumulated to $20,000 now. The compound rate of return
earned on the investment is closest to
A. 6%
B. 8%
C. 10%
D. 12%
5. In most engineering economy studies, the best alternative is the one that
A. Will last the longest time
B. Is easiest to implement
C. Costs the least
D. Is most politically correct
6. The cost of tuition at a certain public university was $160 per credit-hour 5 years ago. The cost today
(exactly 5 years later) is $235. The annual rate of increase is closest to
A. 4%
B. 6%
C. 8%
D. 10%
7. What is meant by the term time value of money?
,8. List three intangible factors.
9. a) What is meant by evaluation criterion?
b) What is the primary evaluation criterion used in economic analysis?
10. List three evaluation criteria besides the economic one for selecting the best restaurant.
11. Discuss the importance of identifying alternatives in the engineering economic process.
12. What is the difference between simple and compound interest?
13. What is meant by minimum attractive rate of return?
,14. What is the difference between debt and equity financing? Give an example of each.
15. Trucking giant Green Corp agreed to purchase rival Roadway for $966 million in order to reduce so-
called back-office costs (e.g., payroll and insurance) by $45 million per year. If the savings were realized
as planned, what would be the annual rate of return on the investment?
16. If Ford Motor Company's profits increased from 22 cents per share to 29 cents per share in the April-June
quarter compared to the previous quarter, what was the rate of increase in profits for that quarter?
17. A broadband service company borrowed $2 million for new equipment and repaid the principal of the
loan plus $275,000 interest after 1 year. What was the interest rate on the loan?
18. A design-build engineering firm completed a pipeline project wherein the company realized a profit of
$2.3 million in 1 year. If the amount of money the company had invested was $6 million, what was the
rate of return on the investment?
, 19. CN Filter received a contract for a small water desalting plant whereby the company expected to make
a 28% annual rate of return on its investment. If the company invested $8 million in equipment the first
year, what was the amount of the profit in that year?
20. A publicly traded construction company reported that it just paid off a loan that it received 1 year earlier.
If the total amount of money the company paid was $1.6 million and the interest rate on the loan was 10%
per year, how much money did the company borrow 1 year ago?
21. A start-up chemical company has established a goal of making at least a 35% per year rate of return on its
investment. If the company acquired $50 million in venture capital, how much did it have to earn in the
first year?
22. At an interest rate of 8% per year, $10,000 today is equivalent to how much a) 1 year from now and b) 1
year ago?
23. A medium-size consulting engineering firm is trying to decide whether it should replace its office
furniture now or wait and do it 1 year from now. If it waits 1 year, the cost is expected to be $16,000. At
an interest rate of 10% per year, what would be the equivalent cost now?
Student: ___________________________________________________________________________
1. An example of an intangible factor is
A. Taxes
B. Cost of materials
C. Morale
D. Rent
2. The time it would take for money to double at a simple interest rate of 5% per year is closest to
A. 10 years
B. 12 years
C. 15 years
D. 20 years
3. At a compound interest rate of 10% per year, $10,000 one year ago is now equivalent to
A. $8,264
B. $9,091
C. $11,000
D. $12,100
4. An investment of $10,000 nine years ago has accumulated to $20,000 now. The compound rate of return
earned on the investment is closest to
A. 6%
B. 8%
C. 10%
D. 12%
5. In most engineering economy studies, the best alternative is the one that
A. Will last the longest time
B. Is easiest to implement
C. Costs the least
D. Is most politically correct
6. The cost of tuition at a certain public university was $160 per credit-hour 5 years ago. The cost today
(exactly 5 years later) is $235. The annual rate of increase is closest to
A. 4%
B. 6%
C. 8%
D. 10%
7. What is meant by the term time value of money?
,8. List three intangible factors.
9. a) What is meant by evaluation criterion?
b) What is the primary evaluation criterion used in economic analysis?
10. List three evaluation criteria besides the economic one for selecting the best restaurant.
11. Discuss the importance of identifying alternatives in the engineering economic process.
12. What is the difference between simple and compound interest?
13. What is meant by minimum attractive rate of return?
,14. What is the difference between debt and equity financing? Give an example of each.
15. Trucking giant Green Corp agreed to purchase rival Roadway for $966 million in order to reduce so-
called back-office costs (e.g., payroll and insurance) by $45 million per year. If the savings were realized
as planned, what would be the annual rate of return on the investment?
16. If Ford Motor Company's profits increased from 22 cents per share to 29 cents per share in the April-June
quarter compared to the previous quarter, what was the rate of increase in profits for that quarter?
17. A broadband service company borrowed $2 million for new equipment and repaid the principal of the
loan plus $275,000 interest after 1 year. What was the interest rate on the loan?
18. A design-build engineering firm completed a pipeline project wherein the company realized a profit of
$2.3 million in 1 year. If the amount of money the company had invested was $6 million, what was the
rate of return on the investment?
, 19. CN Filter received a contract for a small water desalting plant whereby the company expected to make
a 28% annual rate of return on its investment. If the company invested $8 million in equipment the first
year, what was the amount of the profit in that year?
20. A publicly traded construction company reported that it just paid off a loan that it received 1 year earlier.
If the total amount of money the company paid was $1.6 million and the interest rate on the loan was 10%
per year, how much money did the company borrow 1 year ago?
21. A start-up chemical company has established a goal of making at least a 35% per year rate of return on its
investment. If the company acquired $50 million in venture capital, how much did it have to earn in the
first year?
22. At an interest rate of 8% per year, $10,000 today is equivalent to how much a) 1 year from now and b) 1
year ago?
23. A medium-size consulting engineering firm is trying to decide whether it should replace its office
furniture now or wait and do it 1 year from now. If it waits 1 year, the cost is expected to be $16,000. At
an interest rate of 10% per year, what would be the equivalent cost now?
