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Economimcsss Suggestion

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Economimcsss Suggestion

Uploaded by

rohitbanerjee28104
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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‭LastMinuteEngineering‬

‭Subscribe LME‬

‭Economic Decision Making‬

‭●‬ R ‭ ational Decision-Making Process:‬‭This is a fundamental‬‭concept, and questions may‬


‭ask you to identify the steps involved or apply the process to a scenario.‬‭|| decision‬
‭making cycle‬
‭●‬ ‭Engineering Decision Making:‬‭Questions could explore‬‭the unique aspects of‬
‭decision-making in engineering, such as ethical considerations, risk, and uncertainty.‬

‭Engineering Costs & Estimation‬

‭●‬ T ‭ ypes of Costs:‬‭Understanding the different‬‭cost types‬‭(fixed, variable, marginal,‬


‭average, sunk, opportunity, etc.)‬‭is crucial, as questions‬‭may require you to identify or‬
‭calculate specific costs in a given scenario.‬
‭●‬ ‭Cost Estimation Models:‬‭Questions may ask you to apply‬‭different cost estimation‬
‭models‬‭(per-unit, segmenting, cost index, power-sizing‬‭)‬‭or explain their use cases.‬
‭●‬ ‭Learning Curve:‬‭Questions could test your understanding‬‭of the learning curve concept‬
‭and its applications in cost estimation .‬

‭Cash Flow, Interest, and Equivalence‬

‭●‬ T ‭ ime Value of Money:‬‭This is a core concept, and questions‬‭may involve calculations of‬
‭future value, present value, annuities, or debt repayment .‬‭|| fv=pv(1+r)^n numerical‬
‭●‬ ‭Nominal and Effective Interest Rates‬‭:‬‭Understanding‬‭the difference between these‬
‭rates and being able to convert between them is important .‬

‭Cash Flow & Rate of Return Analysis‬

‭●‬ I‭nvestment Appraisal Methods:‬‭Questions may require‬‭you to apply methods like‬‭NPV,‬


‭IRR, PI,‬‭sensitivity analysis, or‬‭break-even analysis‬‭to evaluate investment proposals.‬
‭●‬ ‭Salvage Value:‬‭Understanding how to treat salvage‬‭value in cash flow analysis is‬
‭important.‬

‭Inflation and Price Change‬

‭●‬ P ‭ rice Indexes:‬‭Questions could test your knowledge‬‭of price indexes‬‭(composite vs.‬
‭commodity‬‭) and their use in engineering economic analysis.‬
‭●‬ ‭Inflation and Price Change – Definition, Effects, Causes,‬
‭●‬ ‭Cash Flows with Different Inflation Rates:‬‭Questions‬‭may involve adjusting cash flows‬
‭for varying inflation rates.‬
‭Present Worth Analysis‬

‭●‬ P ‭ resent Worth Techniques:‬‭Applying present worth techniques‬‭to compare alternatives‬


‭is a key skill.‬
‭●‬ ‭Taxes and Inflation:‬‭Understanding the impact of taxes‬‭and inflation on present worth‬
‭analysis is crucial.‬

‭Uncertainty in Future Events‬

‭●‬ R ‭ isk and Uncertainty:‬‭Questions may ask you to assess‬‭risk and uncertainty in‬
‭engineering projects.‬
‭●‬ ‭Expected Value and Decision Trees:‬‭These tools are‬‭used to make decisions under‬
‭uncertainty, and questions may involve their application.‬

‭Depreciation‬

‭●‬ D
‭ epreciation Methods:‬‭Questions could require you‬‭to calculate depreciation using‬
‭different methods (straight-line, declining balance).‬

‭Replacement Analysis‬

‭●‬ M
‭ inimum Cost Life:‬‭Understanding the concept of minimum‬‭cost life and applying it to‬
‭replacement decisions is important.‬

‭Accounting‬

‭●‬ F ‭ inancial Statements:‬‭Questions may test your knowledge‬‭of balance sheets and‬
‭income statements, as well as financial ratios.‬
‭●‬ ‭Cost Accounting:‬‭Understanding cost accounting concepts,‬‭such as direct and indirect‬
‭costs, is relevant.‬

‭❖‬‭Question Set‬
‭Module 1: Economic Decision Making‬

‭Question Types‬‭: Short answers, case studies, scenario-based‬‭questions.‬

‭ .‬ D
1 ‭ efine the steps involved in the rational decision-making process.‬
‭2.‬ ‭Provide a real-life scenario where the rational decision-making process could be applied‬
‭in engineering and identify each step in the process.‬
‭3.‬ ‭Discuss the role of ethical considerations in engineering decision-making. Provide an‬
‭example.‬
‭4.‬ ‭How does risk and uncertainty affect decision-making in engineering projects? Provide‬
‭two examples.‬

‭Module 2: Engineering Costs & Estimation‬

‭Question Types‬‭: Definitions, problem-solving, comparisons.‬

‭ .‬ D
1 ‭ ifferentiate between fixed, variable, and sunk costs with examples.‬
‭2.‬ ‭A company incurs the following costs: $500 fixed, $50/unit variable. If 100 units are‬
‭produced, calculate the total and average costs per unit.‬
‭3.‬ ‭Explain the cost estimation models (per-unit, segmenting, cost index, power-sizing) with‬
‭suitable examples.‬
‭4.‬ ‭If a manufacturing process has a learning curve with a learning rate of 80%, calculate‬
‭the cost of the 4th unit if the first unit costs $100.‬

‭Module 3: Cash Flow, Interest, and Equivalence‬

‭Question Types‬‭: Numerical problems, application questions.‬

‭1.‬ C ‭ alculate the future value of $10,000 invested at an annual interest rate of 5% for 10‬
‭years.‬
‭2.‬ ‭What is the present value of $15,000 to be received 5 years from now, assuming a‬
‭discount rate of 8%?‬
‭3.‬ ‭Explain the difference between nominal and effective interest rates with examples.‬

‭Module 4: Cash Flow & Rate of Return Analysis‬

‭Question Types‬‭: Problem-solving, decision analysis.‬


‭1.‬ A ‭ project requires an investment of $50,000 and provides annual cash inflows of‬
‭$12,000 for 5 years. Calculate its Net Present Value (NPV) at a discount rate of 10%.‬
‭2.‬ ‭How is the Internal Rate of Return (IRR) used to evaluate investment proposals? Solve‬
‭an example.‬
‭3.‬ ‭Explain how salvage value is treated in cash flow analysis.‬

‭Module 5: Inflation and Price Change‬

‭Question Types‬‭: Conceptual questions, numerical problems.‬

‭1.‬ W ‭ hat is the difference between composite and commodity price indexes? Provide‬
‭examples of their use.‬
‭2.‬ ‭A machine costs $10,000 today. Assuming an inflation rate of 5% per year, what will its‬
‭cost be after 3 years?‬

‭Module 6: Present Worth Analysis‬

‭Question Types‬‭: Analytical, scenario-based questions.‬

‭1.‬ ‭Compare two alternatives using present worth analysis:‬


‭○‬ ‭Alternative A: Initial cost = $10,000; Annual benefit = $3,000; Life = 5 years.‬
‭○‬ ‭Alternative B: Initial cost = $8,000; Annual benefit = $2,500; Life = 5 years.‬
‭Use a discount rate of 8%.‬
‭2.‬ ‭Explain the impact of inflation and taxes on present worth analysis. Provide an example.‬

‭Module 7: Uncertainty in Future Events‬

‭Question Types‬‭: Conceptual and problem-solving.‬

‭ .‬ D
1 ‭ efine risk and uncertainty in engineering projects. How are they different?‬
‭2.‬ ‭A decision tree problem: Evaluate the best option for an investment that involves‬
‭multiple outcomes and probabilities.‬
‭3.‬ ‭Calculate the expected value of a decision with the following probabilities and payoffs:‬
‭○‬ ‭Outcome A: 60%, $50,000‬
‭○‬ ‭Outcome B: 40%, $30,000‬

‭Module 8: Depreciation‬
‭Question Types‬‭: Numerical problems.‬

‭1.‬ C
‭ alculate the annual depreciation for a machine costing $20,000 with a salvage value of‬
‭$2,000 and a useful life of 5 years using:‬
‭○‬ ‭Straight-line method.‬
‭○‬ ‭Declining balance method with a rate of 40%.‬

‭Module 9: Replacement Analysis‬

‭Question Types‬‭: Problem-solving, scenario-based questions.‬

‭ .‬ E
1 ‭ xplain the concept of minimum cost life with an example.‬
‭2.‬ ‭A machine costs $15,000 to purchase and $1,000 annually to maintain. A new machine‬
‭costs $25,000 but only $500 annually to maintain. Assuming a life of 10 years and a‬
‭discount rate of 10%, determine if the replacement is justified.‬

‭Module 10: Accounting‬

‭Question Types‬‭: Definitions, analysis problems.‬

‭1.‬ E ‭ xplain the purpose of a balance sheet and income statement in engineering economic‬
‭analysis.‬
‭2.‬ ‭A company has the following costs: direct costs = $50,000, indirect costs = $20,000.‬
‭What is the total cost of production if 500 units are produced?‬
‭3.‬ ‭Describe the significance of financial ratios in decision-making. Calculate the current‬
‭ratio if current assets are $100,000 and current liabilities are $40,000.‬

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