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Click on each question to check your answer.
1. What is the major assumption in solving engineering economic problems using the present worth method?
The major assumption is its end-of-year convention. (p. 142)
2. Given that three competing projects are all mutually exclusive and all projects’ net worth are greater than zero, should all the projects be accepted?
Only the highest net present worth project should be accepted. (pp. 143, 151-153)
3. What are the three different analysis-period situations discussed in the text?
The three different situations are: useful lives equal to the analysis period, useful lives different from the analysis period, and infinite analysis period. (pp. 144-151)
4. Why should a project’s net present worth greater than zero be accepted?
It should be accepted because positive net present worth adds to the market value of the firm. (pp. 142-143)
5. What are the par value and coupon interest rate discussed in the text?
Bonds are issued at a par value received at the maturity date and coupon interest rate is the rate of interest specified on a bond. (p. 153)