Question

1. The following are economic criteria to evaluate an engineering project, except one. Which one?

Select One:

a) Maximum Profit

b) Minimum Profit

c) Maximum Rate of return

d) Minimum Pollution

e) Minimum Payback period

2. Engineers often use a common method used to resolve uncertainty, which is:

Select one:

a. risk analysis.

b. cash-flow analysis.

c. sensitivity analysis.

d. economic impact analysis.

e. marginal analysis.

3. If offered $100 today or $150 one year from now, you are being asked to:

Select one:

a. make a guess.

b. make a choice under uncertainty.

c. reveal your implied interest rate.

d. compare two values which are not comparable in principle.

e. reveal your private financial information.

Answer 1

1) Answer d.

Maximum profit, minimum profit, max. Rate of return and min payback period are all criteria in economics used to evaluate the economic profitability of an engineering project. The pollution rates should be accounted into the production costs but they are not an economics criteria.

2) Answer c.

The main purpose of the sensitivity analysis is to lower the uncertainties by analyzing mathematical models, and identifying the inputs that cause the most uncertainties.

3) Answer c.

Revealing the implied interest rate means to calculate the percentage of interest rate between the spot price (100$) and the future payment in one year's time (150$) which in this case will be of 50%.