Test Bank for Engineering Economics Financial Decision Making for Engineers Canadian 6th edition

Test Bank for Engineering Economics Financial Decision Making for Engineers Canadian 6th edition TEST Bank Engineering Economics 6 th Edition Niall M. Fraser Elizabeth M. Jewkes Mehrdad Pirnia Engineering Economics, 6e (Fraser/Pirnia) 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 Type: 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 Type: 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 Type: Qualitative 1 © 2017 Pearson Canada Inc. 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 Type: 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 Type: 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 Type: Qualitative 2 © 2017 Pearson Canada Inc. 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: MC Page Ref: 9-10 Topic: 1.5. The moral question: Three true stories Skill: Applied Type: Qualitative 8) The best way to find some answers to difficult moral questions in engineering design and project 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 Type: 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 Type: Quantitative 3 © 2017 Pearson Canada Inc. 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 Type: 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 Diff: 2 Type: MC Page Ref: 2-6 Topic: 1.2. What is engineering economics Skill: Applied Type: Qualitative 12) Analyze the following statement: "There is 50% probability of raining." This statement concerns 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 and sensitivity analysis Skill: Applied Type: Qualitative 4 © 2017 Pearson Canada Inc. 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 and sensitivity analysis Skill: Recall Type: Qualitative 14) If you are asked to choose between $100 today and $150 one year from now, you are being asked to A) make a guess. B) reveal your implied interest rate. C) compare two values which are not comparable in principle. D) reveal your private financial information. E) make a choice under uncertainty. Answer: B Diff: 3 Type: MC Page Ref: 6-8 Topic: 1.4. Dealing with abstractions Skill: Applied Type: Qualitative 15) Which of the following items has negligible maintenance costs? A) computer B) building C) ruler D) shoes E) fur hat Answer: C Diff: 2 Type: MC Page Ref: 6-8 Topic: 1.4. Dealing with abstractions Skill: Applied Type: Qualitative 5 © 2017 Pearson Canada Inc. 16) You decide to buy a car. The following are some questions you have to answer with respect to your purchase. Which question is directly associated with engineering economics? A) what colour? B) what size? C) CD player or tape player? D) to lease or to own? E) Ford or Toyota? Answer: D Diff: 2 Type: MC Page Ref: 3 Topic: 1.3. Making decisions Skill: Applied Type: Qualitative 17) Susan is evaluating an engineering project. She assumes zero inflation for the duration of the project. With respect to this situation, which statement is consistent with the subject matter of engineering economics? A) A zero inflation assumption is always a good one. B) A zero inflation assumption is not realistic but it is better than assuming some uncertain inflation rate. C) A zero assumption is not a bad one for the base case, but then the project should be evaluated under different values in some range to see how inflation affects the project. D) Since in Canada inflation is low, it is possible to neglect it. E) The highest historical inflation rate must be chosen instead. Answer: C Diff: 3 Type: MC Page Ref: 3-6 Topic: 1.4. Dealing with abstractions Skill: Applied Type: Qualitative 18) An owner of a small company is deciding to sell her business. She received several options specified bellow. Which one should the company's owner accept? A) $600 000 in cash B) $500 000 in government bonds earning a 5% rate of return over 10 years C) $400 000 in securities earning an 8% rate of return over 8 years D) 15% of the future profits earned by the next owner during first 10 years E) It is impossible to compare these offers due to uncertainty about basic economic variables over time. Answer: E Diff: 3 Type: MC Page Ref: 3-6 Topic: 1.4. Dealing with abstractions Skill: Applied Type: Quantitative 6 © 2017 Pearson Canada Inc. 19) Suppose that you are asked to evaluate a project of building a new bridge. Which of the following factors is the least important in terms of engineering economics? A) service life of the bridge B) value added by the bridge C) cost structure D) vehicle stock in your city E) current interest rate Answer: D Diff: 3 Type: MC Page Ref: 3-6 Topic: 1.4. Dealing with abstractions Skill: Applied Type: Qualitative 20) Based on your intuition and experience, which of the following options has the highest value? A) $100 government bond earning a 5% annual rate of return B) $100 invested in a fund with a 10% annual rate of return C) $200 government bond earning a 5% annual rate of return D) $200 invested in a fund earning a 10% annual rate of return E) $150 invested in a fund earning a 7% annual rate of return Answer: D Diff: 2 Type: MC Page Ref: 6-8 Topic: 1.4. Dealing with abstractions Skill: Applied Type: Quantitative 21) Engineering economics is important because A) it is a natural science. B) it provides answers to all financial questions. C) it facilitates the establishment of verifiable facts about decisions. D) it uses mathematical models to address engineering issues. E) it is based on objective laws. Answer: C Diff: 2 Type: MC Page Ref: 4 Topic: 1.2. What is engineering economics Skill: Recall Type: Qualitative 7 © 2017 Pearson Canada Inc. 22) What is the best way to describe a mathematical model? A) It is an exact copy of the real world. B) It is a simplification to describe the real world in a reasonable way. C) It is a set of mathematical relationships with assumptions based on natural laws. D) It is a relationship that includes all aspects of a modelling situation. E) It describes all complex processes that occur in the real world. Answer: B Diff: 2 Type: MC Page Ref: 6 Topic: 1.4. Dealing with abstractions Skill: Recall Type: Qualitative 23) In engineering economics, sensitivity analysis A) addresses risk in engineering projects. B) addresses inflation in a country. C) involves random variables with their probabilities. D) assesses the effect of uncertainty on a decision. E) involves cash flows that are known with certainty. Answer: D Diff: 3 Type: MC Page Ref: 11-12 Topic: 1.6. Uncertainty and sensitivity analysis Skill: Recall Type: Qualitative 24) With sensitivity analysis, usually only one parameter is varied at a time A) because the appropriate tools are not available to vary parameters simultaneously. B) because this best emulates "real world" scenarios. C) so as to simplify the procedure. D) so that the effect of each can be observed independently of all other parameters. E) so that the effect can be effectively monitored. Answer: D Diff: 2 Type: MC Page Ref: 12 Topic: 1.6. Uncertainty and sensitivity analysis Skill: Recall Type: Qualitative 25) Most of the economic values we use in our evaluation of engineering projects are A) precise and very descriptive. B) approximate. C) based on robust statistical estimation. D) derived from natural experiments. E) results of precise statistical surveys. Answer: B Diff: 2 Type: MC Page Ref: 11 Topic: 1.6. Uncertainty and sensitivity analysis Skill: Recall Type: Qualitative 8 © 2017 Pearson Canada Inc. 26) When we say "let us assume that economic agents are rational," in fact we A) precisely describe behaviour of economic agents. B) want economic agents to behave that way. C) make an assumption to predict the agents' behaviour. D) impose restrictions on our model. E) introduce uncertainty into our modelling process. Answer: C Diff: 3 Type: MC Page Ref: 6 Topic: 1.3. Making decisions Skill: Applied Type: Qualitative 1.2 Short Answer Questions 1) What is the subject matter of Engineering Economics? Answer: Engineering economics deals with techniques of quantitative analysis useful for selecting a preferable alternative from several technically viable ones. Its major objective is to allow an engineer to determine which of several alternatives is economically best. Diff: 1 Type: ES Page Ref: 3 Topic: 1.2. What is engineering economics Skill: Recall Type: Qualitative 2) Briefly describe the structure of a decision-making process as discussed in your textbook. Answer: The textbook presents this structure in a form of a pyramid. At the top of the pyramid are preferences, which directly control the choices made. The next tier is composed of people and politics. Politics means the use of power in organizations. The next tier is a collection of facts. The facts, which may not be verifiable, contribute to the politics and people, and indirectly to the preferences. At the bottom of the pyramid are the activities that contribute to the facts. These include the history of previous similar decisions, statistics of various sorts, and a determination of costs. Diff: 2 Type: ES Page Ref: 4-5 Topic: 1.3. Making decisions Skill: Recall Type: Qualitative