Engineering Economics Exam Questions and Answers, Exams of Engineering

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Exam 2025,

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Engi

neering Economics

Engineering Economics (University of Ontario Institute of Technology)

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• A junk bond is

i) issued by a recycling company

j) a high risk bond

k) one paying a high

interest

l) l) b and c

• A company wants to replace a machine in 15 years that will cost $10,000. It does this by setting

up a sinking fund of $320 per year. What is the closest interest rate that will make this happen

i) 9%

j) 9.5%

k) 9.7%

l) 10%

• A daily interest account pays 6%. What is the (closest) effective interest rate?

a) 6%

b) 6.2%

c)

d) 6.6%

• A program runs for 1 second for a variable n=10. When n is increased by 1, the running time

increases 18%. For n=50, what will be the running time in seconds?

e) 40

f) 40x

g) 1024

h) 10

18

• A sludge plant to clean Bowmanville’s sewer lagoon cost $2M in 1999 and could handle a flow of 1

MGD. The city has expanded greatly as has its sewage. It must be replaced with a

d) a and b

▪ An asset purchased for $50,000 is to be depreciated over 5 years using the straight line

method. Salvage value is $10,000. Its book value after 3 years is

a) 26,

b) 24,

Depreciation

Expense = Cost of asset – Scrap Value

life span ( years )

c) 20,

d) 10,

▪ A company wants to replace a machine in 15 years that will cost $10,000. It does this by setting

up a sinking fund of $320 per year. What is the closest IRR?

a) 9%

b) 9.5%

c) 9.7% done through Interpolation 320=10,

(AƒF,I,15)

1000(AƒF,9%,15) = 340.

1000(AƒF,10%,15) = 314.

Interpolation

aƒb = cƒd

c= (aƒb)*d

a= 320 − 340.

b= 314.7−340.

c= i−

d=10 − 9 =

therefore

i =

c) 10%

▪ A BCR indicating economic desirability has a value

a) 1

b) > 1 unit 8 slide 46

c) < 1

d) 0

ABC refers to

a) an accounting method for determining indirect costs

b) a way of pinpointing cost factors

c) a method of developing cost pools

d) all of the above

• ABC refers to

a) an accounting method for determining indirect costs

e) an accounting method for allocating direct costs

f) Always Buy

Canadian

g) a and b

• At a compound interest rate of 10% per year, $10,000 a year ago is now worth

m) $

n) $

o) $

p) $12,

An increase in supply will lead to

i) a decrease in the equilibrium price and an increase in the equilibrium quantity

j) a decrease in the equilibrium price and a decrease in the equilibrium quantity

k) an increase in the equilibrium price and an increase in the equilibrium quantity

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d) The supply curve is highly elastic

e) The supply curve is highly inelastic

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• Hyperinflation occurs when

i) the inflation rate increases more than 10% in a month

j) the inflation rate increases more than 10% in a year

k) the inflation rate increases more than 50% in a month

l) the inflation rate increases more than 50% in a year

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• In the last 20 years in Canada, the Real Wages of Canadians have

a) skyrocketed

b) stayed the same

c) increased somewhat

d) decreased somewhat

• If your pension plan is indexed then the value of the plan is

e) Increased or decreased by the CPI

f) Increased or decreased by the GDP

g) Increased or decreased by the Unemployment rate

h) Increased or decreased by the TSE index

• If we entered into a long period of recession, then

i) Unemployment would rise

j) Investments would slow

k) The CPI would drop

l) All of the above

• If the Bank of Canada felt that deflationary pressures were beginning to affect the economy,

it might well

m) Do nothing

n) Issue more paper money

o) Recall paper money

p) Raise taxes

• If you invest a sum at 4% per year, it will take this many years to double.

q) 4

r) 8

s) 16

d) 18

• If the interest rate of a bond is the same as the expected interest rate, then this is true

of the present worth of the bond:

f) it is the same as its face value

g) it is lower than its face

h) it is higher than its face

i) it is worthless

• If the price of a commodity is highly elastic, then

i) demand will not affect its price

j) an increase in demand will force people to buy another alternative

decrease in demand will force people to buy another alternative

k) a decrease in demand will force people to buy another alternative

l) people will buy it no matter what its cost

• If the price of a commodity is highly inelastic, then

b) demand will not affect its price

c) an increase in demand will force people to buy another alternative

d) a decrease in demand will force people to buy another

alternative h) people will buy it no matter what its cost

• If Canadian income taxes were to double, this would likely happen:

i) the underground economy would explode

j) a recession would set it

k) many Canadians would head

State−side

l) all of the above

• If the cash flow follows a geometric gradient, the shape of that curve is a

i) straight line

j) horizontal

line k) parabola

l) exponential

• In our cash flow problems, which of the following are assumptions that we make?

e) Interest rates are constant

f) Payments are made at the end of periods

g) Outflows happen at the beginning of periods

h) All of the above

• If you had a 20 year annual annuity flow that begins 6 years from now, then you would use

which functions to compute its total PV?

j) PƒA

k) PƒF then PƒA

l) PƒA then PƒF

m) PƒF

• If you do not do interperiod interest compounding, then you would do this:

n) Make all cash flows happen at the end of periods

o) Make all cash flows happen at the beginning of periods

p) Make all positive cash flows happen at the beginning of periods, negatives at the end

q) Make all negative cash flows happen at the end of periods, positives at the beginning

• If Iran’s President Ahmadinejab were to threaten to come to the aid of the Kurdish rebels in

Iraq now being attacked by Turkey, what will this do to the spot price of oil?

r) Nothing

s) It will increase slightly

t) It will soar

u) Depends on OPEC’s reaction

• If the demand of a commodity is highly inelastic, then

m) Supply change will not affect its price

n) an increase in demand will force people to buy another alternative

o) a

• In our cash flow problems, which of the following are implicit assumptions that we make?

i) Interest rates are constant

j) Payments are made at the end of periods

k) Initial costs happen at the beginning of year 0 l)

All of the above

• In BCR analysis, the defender is

a) a) The PNB

b) b) A person who will defend the project to the death

c) c) The Lawyer

d) d) Asset currently in place

• If you wanted a 3 year annual $1,000 annuity flow that begins 6 years from now, then you would use

which functions to calculate the amount you would have to spend today to get that flow? Assume 5%.

a) 3(1000(PƒF,5%,6))

b) (PƒF,5%,5)(PƒA,5%,3)1,

c) (PƒF,5%,6)(PƒA,5%,3)1,000 d)

1000(PƒA,5%,6)

▪ If a company wants to buy a cement-mixer truck in 5 years for $100,000, what is the

Present Worth of that truck, assuming an interest rate of 10%?

a) 62,

b) 16,

c) 26,

d) 100,

▪ If a company buys a bull dozer for $60,000 and rents it out at $15,000 per year, the

length of time to recover the investment, at 10%, is

a) 4 years

b) 4.8 years

c) 5.1 years

d) 5.35 years

▪ If the index in a Cost Capacity Equation is equal to1, it means that

a) economies of scale are at work

b) the re

l lat

i ionsh

i ip

i is

linear

c) diseconomies of scale are at work

d) the MARR will not be met

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▪ Lucky Linda, a very good Avon salesperson, is averaging $100,000 per year in sales. At

an interest rate of 10%, what is her future worth in 5 years?

a) 163,

b) 379,

c) 500,

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• My tuition at Queen’s was $300 in 1961. Your UOIT tuition is $7,000 this year. In real terms

who paid more, you or me?

m) We paid about the same

n) I paid more

o) You paid more

p) You paid a LOT more

• Mad cow disease strikes the Canadian beef industry, forcing the slaughter of 90% of our

cows. The borders close. What will happen to the supply and demand curves for

hamburgers?

w) Demand curve shifts left, supply curve shifts left

x) Demand curve shifts left, supply curve shifts right

y) Demand curve shifts right, supply curve shifts left

z) Demand curve shifts right, supply curve shifts right

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• The MARR is always higher than this

t) the Prime Rate

u) the ROR of Canada Savings Bonds

v) the weighted TSE index of the year

w) 10%

• The closest future worth in year 10 of $10,000 at an interest rate of 10% is i)

10

j) 10000(FƒP, 10%,10) k)

l) all of the above

• The Prime Rate has increased 1ƒ10% each month for the last 6 months. Loonie Toonie estimates

that this will continue for the next 18 months. LT is guilty of

e) nothing

f) linear extrapolation

g) linear interpolation

h) incrementalism

• The Feds are auctioning off $60B of dollars this week. Why are they doing this?
  • They need the money
  • They want to insert liquidity into the market
  • They want to stem inflation
  • They want to bolster the US dollar
• The rise in the Canadian dollar is primarily a result of
  • a demand for our natural resources

d) 610,

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• Public Sector projects do not have “profit”. Instead they replace increasing profit with

i) maintaining high quality

j) minimizing costs

h) sole−sourcing the costs

i) paying taxes

▪ Public Sector projects, compared to private ones are

a) larger

b) harder to quantify in terms of ROR

c) longer

d) a

l ll of the

above

SSSSSSSSSSSSSSSS

• Sensitivity analysis describes

a) Organizations’ ability to raise liquid cash

b) The credit rating of an organization

c) The risk aversion of the customer

d) The identification of the input variables that will most affect the outcome of the project

ying north from Mexico

▪ Stagflation occurs when

a) the GDP decreases and inflation increases

a) the GDP increases and inflation increases

b) the GDP increases and inflation decreases

c) the GDP decreases and inflation decreases

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• FEAS wants to replace its PACE computers in 4 years. The cost then is estimated to be

$100,000. Which expression states the amount for this that must be set aside in this

year’s FEAS’ budget, assuming a 3% economy?

l) 100000(PƒF,3%, 4)

n)

100000(FƒP,3%,4)

o)

100000(FƒA,3%,3)

p)

100000(AƒF,3%,3)

▪ For the first year, the following is true for the UCC and CCA:

a) they are the same

b) CCA1 = P(d/2) UCC1 = P(d/2)

d) CCA1 = P(1 – d/2)(1-d)

n- 2

UCC1 = P(1-d/2)(1 – d)

n- 1

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• Oshawa wants to fix its streets over the next 10 years. They deposit $500,000 initially into an

account and then the yearly deposits will increase $100,000 per year for the next 9 years. Which

equation properly expresses the PW, if the interest rate is 10%?

i) 500000(PƒA, 10%, 10) + 100000(PƒG, 10%, 10)

j) 500000 + 100000(AƒG, 10%, 10)

k) 500000(PƒA, 10%, 10) + 9(100000)

l) 500000 + 100000(PƒG, 10%, 10)

RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR

• Ross Perot’s “Sucking Sound” refers to the sound made by

aa) inflation

j) deflation

k) jobs flying south to Mexico

l) jobs fl

c)

CCA1 = P(d/2) UCC1 = P(1-d/2)

Economic Service Life of the Confederation Bridge?

s

• Which statement is true? Over the last 25 years, the annual number of hours worked

bb) Has substantially increased for both Americans and Canadians

cc) Has substantially decreased for both Americans and Canadians

dd) Has substantially risen for Americans, and slightly increased for Canadians

ee) Has substantially risen for Canadians, and slightly increased for Americans

• Who invented the “Important few and the trivial many” rule?

ff) J M Bennett

gg) A Marshall

hh) J M Keynes

ii) V Pareto

What is stagflation?

jj) A bachelor’s pre−wedding party

kk) Out of control inflationary spiral

ll) Increasing the money supply

mm) Combination of inflation and poor economic grow

• Which of the following is a way for a company to raise money?

i) raid the corporate bank account

j) issue more stocks

k) issue a bond

l) all of the above

▪ Which of the following is a way for a company to raise money?

a) raid the corporate bank account

b) issue more stocks

c) issue a bond

d) all of the above

• Which is NOT included in the calculation of GDP?

nn) corporate profits before taxes

h) wages and salaries

i) net farm and small business

incomes

j) intermediate goods and services

• Who defines the CPI?

i) Statscan

j) The Bank of Canada

k) The World Bank

l) Parliament

• What is the

oo) 10 year

pp) 100 years

qq) 500 years

rr) Infinite

• What did the Bank of Canada do this week?

ss) Dropped the Prime by 50 basis points (0.5%)

tt) Auctioned off a mess of money

uu) Raised the Prime by 50 basis points

vv) Nothing

• What new economic incentive was introduced in the most recent Federal budget?

ww) Taxpayers can hide up to $5,000 in a tax−free account yearly

xx) Income tax was lowered

yy) The RRSP deadline was extended to May

zz) All of the above

2 When stocks fall in price, this happens:

a) Bonds rise

b) Price of oil increases

c) Price of gold rises

d) All of the above

• Which of the following are NOT measures of physical efficiency (circle all)?

a. BTUs

b. Kilowatt−hours

c. RORs

d. Horsepower

• Which of these is not an objective?

e) Become Number One in sales in our field

f) Exceed the MARR by 20%

g) Become a world−class company

h) Reduce costs by 50%

• What is the most important concept in Engineering Economics?

i) Unemployment rate

j) Risk analysis

k) Inflation rate

l) Time value of money

• What would you NOT typically do in an Engineering Study?

m) Define alternatives

n) Consider the do−nothing option

o) Survey the competition

p) Ask your significant other’s opinion

z) The other partner takes over everything

aa) The assets of the dead partner becomes part of the estate

bb) The partnership is dissolved

• Which is NOT a SMART component for objectives?

cc) Specific

dd) Meaningful

ee) Achievable

ff) Time−limited

• When is the major assumption in applying the CostƒBenefit Principle to select projects?

gg) People will make rational decisions

hh) The interest rate will not change

ii) You know your competitors’ strategies

jj) The CPI will not change

• How many depressions have Canada had since 1900?

kk) None

ll) One

mm) Two

nn) Lots

• Which statement is true? Over the last 25 years, the annual number of hours worked

oo) Has substantially increased for both Americans and Canadians

pp) Has substantially decreased for both Americans and Canadians

qq) Has substantially risen for Americans, and slightly increased for Canadians

rr) Has substantially risen for Canadians, and slightly increased for Americans

• What measures only the amount of money in circulation (including chequing and current

accounts)?

ss) M

tt) M

uu) M

vv) GDP

• Who invented the “Important few and the trivial many” rule?

ww) J M Bennett

xx) A Marshall

yy) J M Keynes

zz) V Pareto

• What is stagflation?

aaa) A bachelor’s pre−wedding party

bbb) Out of control inflationary spiral

ccc) Increasing the money supply

ddd) Combination of inflation and poor economic growth

• Which is NOT included in the calculation of the M1?

eee) currency

fff) personal savings accounts

ggg) personal chequing accounts

hhh) current accounts

• Who defines the Food Price Index?

m) Statscan

n) The Bank of Canada

o) The World Bank

p) The UN

• What is your sunk cost to quit today and go home to mom?
  • $6000 + 2000 + 2000 + 10000 (tuition, books, computer, food& lodging)
  • $6000 + 2000 + 2000 + 10000*26ƒ34 (tuition, books, computer, food&lodging)
  • $6000 (tuition)

• Which of these is not a PIIG?
  • Iceland
  • Ireland
  • Greece
  • Portugal
• What is the “Delphi Method”?

iii) An ancient Greek way of divining the future

jjj) Using a group of experts to estimate a variable

kkk) Using a single expert to estimate a variable

lll) Opening up a chicken to divine the future

• Which of these should be in the basket of goods for computing the CPI?

mmm)I−pods

nnn) Radishes

ooo) Gasoline

ppp) Wheat