Engineering Economy: Basic Methods for Economy Studies

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Questions and Answers

What is a benefit-cost ratio (BCR) used for?

  • To show the relationship between the costs and benefits of a proposed project in monetary terms. (correct)
  • To show the relationship between the costs and benefits of an ongoing project in monetary terms.
  • To show the relationship between the costs and benefits of an ongoing project in qualitative terms.
  • To show the relationship between the costs and benefits of a proposed project in qualitative terms.

What does it mean if a project has a BCR greater than 1.0?

  • The project is expected to deliver a negative net present value.
  • The project's benefits outweigh the costs.
  • The project's costs outweigh the benefits.
  • The project is expected to deliver a positive net present value. (correct)

What should a firm do if a project's BCR is less than 1.0?

  • Increase the budget for the project.
  • Invest in the project.
  • Not consider the project. (correct)
  • Consider the project.

What is the purpose of out-of-pocket costs in a project?

<p>To cover operation and maintenance. (D)</p> Signup and view all the answers

What does a company expect capital to earn?

<p>More than 25% before income taxes. (D)</p> Signup and view all the answers

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