Department of Management Sciences

Semester: Fall 2020 (January 07, 2021)

Course Code: MS291
Instructor: Dr. Maazullah khan
Quiz # 4
CLO # 3 (50%)
Name______________________________ Student ID: _________________
Section__________________ Faculty_________________

Instructions:
Quiz # 4 Engineering Economics (MS291)
It is an individual quiz.
It is a closed book quiz.
Time Allowed = 20min
Total Marks = 10

Pick the right answer. [Total Marks: 10]

1. Which of the following statements is correct?

a. The disbenefits are subtracted from benefits in profitability index.
b. In Conventional B/C Ratio, savings to the government are added to the benefits in numerator.
c. In Modified B/C Ratio, disbenefits are added to the cost in denominator.
d. None of the above is correct

2. Which of the following statements is true for public sector projects?

a. Public sector projects are run on profit basis
b. Public sector projects are funded by large corporations
c. Public sector projects are owned by citizens
d. Public sector projects are carried out by federal government only

3. Which of the following is NOT a characteristic of a public sector projects?

a. It requires large investment
b. It has longer life
c. It is funded by taxes
d. High interest rate to raise funds for financing public sector projects

4. Which of the following statements is correct?

a. In Design-Build-Operate-Maintain-Finance (DBOMF) Contract, the funding for the project is
coming from the contractor.
b. In Design-Build-Operate-Maintain (DBOM) Contract, the funding for the project is coming from
the contractor.
c. If incremental B/C analysis ΔB/C > 1; it implies that in pairwise evaluation the high cost
alternative is justified.
d. If incremental B/C analysis ΔB/C > 1; it implies that in pairwise evaluation the Do-nothing
alternative is justified.

5. Which of the following is acceptable in calculation of Conventional B/C Ratio?

a. Convert all cash flows to AW

1
 Department of Management Sciences
Semester: Fall 2020 (January 07, 2021)
Course Code: MS291
Instructor: Dr. Maazullah khan
Quiz # 4
CLO # 3 (50%)
Name______________________________ Student ID: _________________
Section__________________ Faculty_________________
b. Convert all cash flows to PW
c. Convert all cash flows to FW
d. All of them are acceptable

6. For the following cash flow estimates at a discount rate of 7% per year, what is the Modified Benefit-
Cost ratio?

Item Cash Flow

FW of benefits, $ 30,800,000
AW of disbenefits, $ 105,000
First cost, $ 1,200,000
M&O costs, $ per year 400,000
Life of project, years 20
a. 1.26
b. 2.17
c. 19.1
d. 25.5

7. For the following cash flow estimates at a discount rate of 7% per year, what is the Profitability
Index (PI)?

Item Cash Flow

AW of benefits, $ 751,212
AW of disbenefits, $ 105,000
First cost, $ 1,200,000
M&O costs, $ per year 400,000
Life of project, years 20

a. 2.17
b. 3.1
c. 751.2
d. 0.73

8. In CER analysis for ME projects, we order alternatives by;

a. Effectiveness measure E
b. Cost effectiveness ratio CER
c. Dominance D
d. Cost from low to high

2
 Department of Management Sciences
Semester: Fall 2020 (January 07, 2021)
Course Code: MS291
Instructor: Dr. Maazullah khan
Quiz # 4
CLO # 3 (50%)
Name______________________________ Student ID: _________________
Section__________________ Faculty_________________

9. True/False: If ∆C/Echallenger > C/Edefender , then dominance is present and we eliminate the challenger.
a. True
b. False

10. Which of the following is true?

a. Engineers must maintain integrity and impartiality and always adhere to Code of Ethics.
b. The integrity of a professional engineers demands that he should protect the interest of his/her
employers even if it violates the Code of Ethics.
c. Error of judgement is more serious than violating code of ethics.
d. None of the above is true.