ENGINEERING ECONOMY 9TH EDITION
BLANK TEST BANK — ALL 200 MC
QUESTIONS ,ANSWERS WITH
RATIONALES
This premium exam resource contains 200 comprehensive multiple-
choice questions with detailed analytical rationales covering all 19
chapters of Engineering Economy, 9th Edition by Leland Blank. Each
question is precision-engineered to test core concepts including time-
value-of-money factors, MACRS depreciation, incremental rate of
return, and after-tax cash flow analysis. Perfect for students seeking
top exam scores or instructors looking for high-quality engineering
economics testing materials.
Chapter 1: Foundations of Engineering Economy
1. Which of the following describes the operational meaning of
corporate sustainability?
A) Maximizing short-term profit margins exclusively.
B) Integrating economic, environmental, and social goals into business
decisions.
C) Adhering strictly to minimum local legal regulations.
D) Eliminating all capital expenditure projects.
Answer: B
Rationale: Corporate sustainability emphasizes a triple-bottom-line
approach, balancing economic growth with environmental
stewardship and social responsibility for long-term viability.
2. In engineering economic analysis, a cash flow that occurs at the
end of a time period is a convention known as the:
A) Beginning-of-period convention.
,B) End-of-period convention.
C) Mid-period convention.
D) Continuous compounding convention.
Answer: B
Rationale: The end-of-period convention assumes all cash flows
occur at the final moment of an interest period, simplifying algebraic
calculations in time-value-of-money problems.
3. An investor requires a minimum return of 12% per year to clear a
capital hurdle rate. This rate is best known as the:
A) Internal Rate of Return (IRR).
B) Expected Inflation Rate.
C) Minimum Attractive Rate of Return (MARR).
D) Effective Debt Cost.
Answer: C
Rationale: The MARR is the baseline hurdle rate established by
management that a project must meet or exceed to justify investing
corporate capital.
4. Which type of interest calculation ignores the accumulation of
interest generated in previous borrowing periods?
A) Compound interest.
B) Simple interest.
C) Continuous interest.
D) Effective annual interest.
Answer: B
Rationale: Simple interest is calculated strictly on the initial principal
amount, neglecting any interest earned or accrued in prior periods.
Chapter 2: Factors: How Time and Interest Affect Money
5. The standard notation factor (P/F, i, n) is mathematically evaluated
using which of the following expressions?
A) \((1 + i)^n\)
B) \((1 + i)^{-n}\)
,C) \([(1 + i)^n - 1] / i\)
D) \(i / [(1 + i)^n - 1]\)
Answer: B
Rationale: The Present Worth of a single future sum is found by
discounting the future value, represented by the formula \((1 + i)^{-
n}\).
6. To find the uniform annual series A equivalent to a uniform gradient
series G, which standard factor must be applied?
A) (A/P, i, n)
B) (P/G, i, n)
C) (A/G, i, n)
D) (G/A, i, n)
Answer: C
Rationale: The (A/G, i, n) factor converts a linear, constantly
increasing or decreasing gradient series into an equivalent equal
annual payment series.
7. A geometric gradient cash flow series is characterized by an
individual cash flow that:
A) Increases or decreases by a constant dollar amount each period.
B) Remains perfectly constant over the entire project life.
C) Increases or decreases by a constant percentage each period.
D) Follows a random distribution pattern based on market inflation.
Answer: C
Rationale: Geometric gradients change by a fixed compound
percentage rate (g) each period, differentiating them from linear
arithmetic gradients.
8. If a company wants to find the future worth F of a uniform series A
over 10 years at i = 8%, the correct factor notation is:
A) (P/A, 8%, 10)
B) (F/A, 8%, 10)
C) (A/F, 8%, 10)
D) (F/P, 8%, 10)
Answer: B
, Rationale: The notation (F/A, i, n) explicitly reads "Find Future Worth
F, given Annual Series A, at interest rate i, over n periods."
Chapter 3: Nominal and Effective Interest Rates
9. An interest rate stated as "12% per year compounded monthly"
represents a:
A) Nominal annual rate.
B) Effective annual rate.
C) Simple monthly rate.
D) Continuous annual rate.
Answer: A
Rationale: A nominal rate states the interest rate over a period but
includes a compounding sub-period, ignoring the compounding effect
within the main period.
10. What is the compounding period (t) for an interest rate specified
as "1.5% per month"?
A) One year.
B) Six months.
C) One month.
D) One week.
Answer: C
Rationale: The compounding period is the explicit unit of time over
which the interest is calculated and applied, which is monthly in this
statement.
11. As the compounding frequency per year increases toward infinity,
the effective annual interest rate approaches:
A) Zero.
B) The nominal annual interest rate.
C) A value calculated via continuous compounding (\(e^r - 1\)).
D) Twice the nominal interest rate.
Answer: C
Rationale: Continuous compounding represents the mathematical
BLANK TEST BANK — ALL 200 MC
QUESTIONS ,ANSWERS WITH
RATIONALES
This premium exam resource contains 200 comprehensive multiple-
choice questions with detailed analytical rationales covering all 19
chapters of Engineering Economy, 9th Edition by Leland Blank. Each
question is precision-engineered to test core concepts including time-
value-of-money factors, MACRS depreciation, incremental rate of
return, and after-tax cash flow analysis. Perfect for students seeking
top exam scores or instructors looking for high-quality engineering
economics testing materials.
Chapter 1: Foundations of Engineering Economy
1. Which of the following describes the operational meaning of
corporate sustainability?
A) Maximizing short-term profit margins exclusively.
B) Integrating economic, environmental, and social goals into business
decisions.
C) Adhering strictly to minimum local legal regulations.
D) Eliminating all capital expenditure projects.
Answer: B
Rationale: Corporate sustainability emphasizes a triple-bottom-line
approach, balancing economic growth with environmental
stewardship and social responsibility for long-term viability.
2. In engineering economic analysis, a cash flow that occurs at the
end of a time period is a convention known as the:
A) Beginning-of-period convention.
,B) End-of-period convention.
C) Mid-period convention.
D) Continuous compounding convention.
Answer: B
Rationale: The end-of-period convention assumes all cash flows
occur at the final moment of an interest period, simplifying algebraic
calculations in time-value-of-money problems.
3. An investor requires a minimum return of 12% per year to clear a
capital hurdle rate. This rate is best known as the:
A) Internal Rate of Return (IRR).
B) Expected Inflation Rate.
C) Minimum Attractive Rate of Return (MARR).
D) Effective Debt Cost.
Answer: C
Rationale: The MARR is the baseline hurdle rate established by
management that a project must meet or exceed to justify investing
corporate capital.
4. Which type of interest calculation ignores the accumulation of
interest generated in previous borrowing periods?
A) Compound interest.
B) Simple interest.
C) Continuous interest.
D) Effective annual interest.
Answer: B
Rationale: Simple interest is calculated strictly on the initial principal
amount, neglecting any interest earned or accrued in prior periods.
Chapter 2: Factors: How Time and Interest Affect Money
5. The standard notation factor (P/F, i, n) is mathematically evaluated
using which of the following expressions?
A) \((1 + i)^n\)
B) \((1 + i)^{-n}\)
,C) \([(1 + i)^n - 1] / i\)
D) \(i / [(1 + i)^n - 1]\)
Answer: B
Rationale: The Present Worth of a single future sum is found by
discounting the future value, represented by the formula \((1 + i)^{-
n}\).
6. To find the uniform annual series A equivalent to a uniform gradient
series G, which standard factor must be applied?
A) (A/P, i, n)
B) (P/G, i, n)
C) (A/G, i, n)
D) (G/A, i, n)
Answer: C
Rationale: The (A/G, i, n) factor converts a linear, constantly
increasing or decreasing gradient series into an equivalent equal
annual payment series.
7. A geometric gradient cash flow series is characterized by an
individual cash flow that:
A) Increases or decreases by a constant dollar amount each period.
B) Remains perfectly constant over the entire project life.
C) Increases or decreases by a constant percentage each period.
D) Follows a random distribution pattern based on market inflation.
Answer: C
Rationale: Geometric gradients change by a fixed compound
percentage rate (g) each period, differentiating them from linear
arithmetic gradients.
8. If a company wants to find the future worth F of a uniform series A
over 10 years at i = 8%, the correct factor notation is:
A) (P/A, 8%, 10)
B) (F/A, 8%, 10)
C) (A/F, 8%, 10)
D) (F/P, 8%, 10)
Answer: B
, Rationale: The notation (F/A, i, n) explicitly reads "Find Future Worth
F, given Annual Series A, at interest rate i, over n periods."
Chapter 3: Nominal and Effective Interest Rates
9. An interest rate stated as "12% per year compounded monthly"
represents a:
A) Nominal annual rate.
B) Effective annual rate.
C) Simple monthly rate.
D) Continuous annual rate.
Answer: A
Rationale: A nominal rate states the interest rate over a period but
includes a compounding sub-period, ignoring the compounding effect
within the main period.
10. What is the compounding period (t) for an interest rate specified
as "1.5% per month"?
A) One year.
B) Six months.
C) One month.
D) One week.
Answer: C
Rationale: The compounding period is the explicit unit of time over
which the interest is calculated and applied, which is monthly in this
statement.
11. As the compounding frequency per year increases toward infinity,
the effective annual interest rate approaches:
A) Zero.
B) The nominal annual interest rate.
C) A value calculated via continuous compounding (\(e^r - 1\)).
D) Twice the nominal interest rate.
Answer: C
Rationale: Continuous compounding represents the mathematical
