• University of Ottawa

• ECO 1192 Engineering Economics ECO 1192B
  Final Examination (PE1)

Please Note:
1. You have 75 minutes (7 pm to 8:15 pm) to complete Partial
Examination #1 which consists of 35 multiple choice questions.
2. Questionnaires and answer sheets are colour coded. Ensure
that your copies have matching colours
 Questionnaire colour: indicated in the footer
 The Scantron (answer sheet) colour: upper right-hand
corner.
3. All questions must be answered on the Scantron sheet.
4. Please indicate your name, student number and course
number on the front of the Scantron sheet. Failure to provide
this information could result in the cancellation of your
examination.
5. Correct answers are worth one (1) point and incorrect answers
zero (0).
6. You may keep the examination questionnaire.
7. You MUST show your University of Ottawa I.D. card as you
hand-in the answer sheet AND sign the attendance sheet.
Engineering Economics ECO 1192A Page 1
2nd Partial Examination (Blue) October 2006
ENGINEERING ECONOMICS
ECO 1192B
Final Examination (PE1)
*** REVISED ***
C.Théoret Winter 2007
8. Thank you.
********************************************************************
1. If the rate of interest is 18% compounded annually, the nominal rate of interest is
a) 18%
b) 19.56%
c) 19.25%
d) 1.5%
e) None of the above answers
2. If the rate of interest is 18% compounded annually, the effective rate of interest is
a) 18%
b) 19.56%
c) 19.25%
d) 1.5%
e) None of the above answers
3. If the rate of interest is 18% compounded quarterly, the nominal rate of interest
(annual) is
a) 18%
b) 19.56%
c) 19.25%
d) 1.5%
e) None of the above answers
4. If the rate of interest is 18% compounded quarterly, the effective rate of interest
(annual) is
a) 18%
b) 19.56%
c) 19.25%
d) 1.5%
e) None of the above answers
5. If the rate of interest is 12% compounded quarterly, the actual rate of interest is
a) 18%
b) 19.56%
c) 19.25%
d) 1.5%
e) None of the above answers
6. If the rate of interest is 18% compounded continuously, the nominal rate of
interest is
Engineering Economics ECO 1192A Page 2
2nd Partial Examination (Blue) October 2006
a) 18%
b) 19.56%
c) 19.25%
d) 1.5%
e) None of the above answers
7. The nominal rate of interest compounded annually which is equivalent to an
quarterly rate of 2% is
a) 8%
b) 2%
c) 8.9%
d) None of the above answers.
8. Which monthly rate of interest is equivalent to a nominal rate of 12%
compounded monthly is
a) 12%
b) 1%
c) 12.986%
d) None of the above answers.
9. If an interest rate is compounded annually, the actual, effective and nominal rates
MUST be identical.
a) True
b) False
10. The effective annual rate of interest compounded annually which is equivalent to
a nominal rate of 12% compounded continuously is
a) 12.75%
b) 12%
c) 8%
d) None of the above answers.
11. A project with a positive Present Worth must have an internal rate of return
greater than the MARR.
a) True
b) False
12. A project has a 15% external rate of return. This means that all project cash
inflows will be reinvested at the MARR (= 10%).
a) True
b) False
13. The incremental rate of return (IRR) is the rate of return for which the Net Present
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2nd Partial Examination (Blue) October 2006
Worth of project A equals the Net Present Worth of project B.
a) True
b) False
14. Mutually exclusive projects A and B have valid (acceptable) individual internal
rates of return (IRR). Project A's first cost (PA) is less than Project B's first cost
(PB). If the Incremental Internal Rate of Return between the two projects exceeds
the MARR, which project would you select?
a) A
b) B
c) A and B
d) Neither A nor B
15. Mutually exclusive projects A and B have 10-year and 5-year durations (lives)
respectively and positive Net Future Worth values (before adjustment for their
different lives. If Project A’s Net Future Worth is less than Project B’s Net Future
Worth, which project is better?
a) A
b) B
c) A and B
d) Insufficient information to decide on the better project.
16. If two mutually exclusive projects A and B are compared using the Future Worth
Method and the Annual Equivalent Method, both methods will always lead to the
same decision as to the better project.
a) True
b) False
17. You are asked to determine the economic validity of projects A and B using the
External Rate of Return Method (ERR). Is a common period of analysis
necessary to determine their acceptability?
a) Yes
b) No
18. You are given two mutually exclusive projects A and B where PA > PB; NA > NB
and IRRA < IRRB. Which project would you select?
a) A
b) B
c) A and B
d) Neither A nor B
e) Need more information.
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2nd Partial Examination (Blue) October 2006

19. If A, B, C, D, E and F are independent projects and MARR = 20%, valid projects
are:
a) A, B, C and D
b) A, B and C
c) B and C
d) None of the above answers.
20. If A, B, C, D, E and F are mutually exclusive projects and MARR = 15%, the best
(valid) project is:
a) B
b) C
c) D
d) None of the above answers.
21. If A, B, C, D, E and F are mutually exclusive projects and MARR = 10%, the best
(valid) project is:
a) C
b) D
c) E
d) F
e) None of the above answers.
22. If A, B, C, D, E and F are mutually exclusive projects and MARR = 30%, the best
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2nd Partial Examination (Blue) October 2006
(valid) project is:
a) C
b) D
c) E
d) F
e) None of the above answers.
23. You are given two independent projects A and B where PA > PB; NA = NB and