APSC 221

(T/F) If two products are mutually exclusive if, in the process of choosing one, all other alternatives are included.

False

(T/F) The WBS is sometimes called a work element structure.

True

(T/F) The conventional approach for computing interest is the compound interest approach.

True

(T/F) The effective cost of purchasing an asset is less than its first cost.

True

(T/F) The expected value associated with the node farthest to the left in a decision tree is the expected value of the overall decision.

True

The IRR is the interest rate at which a project _____. a) Makes a profit b) Just breaks even c) Fails d) Incurs a loss

b) just breaks even

Very broadly, change initiatives can be categorized into three main types, which of the following is NOT one of them? A) Contingency or crisis change. B) Transformational or visionary change. C) Bounded or limited scope change. D) Deliverable-led or project change.

A) Contingency or crisis change.

(T/F)Sunk costs should be included in an engineering economic analysis.

False

The duration and structure of change initiatives vary significantly, but all have a degree of complexity and ... A) involve cost accounting and management accounting. B) are outside the normal daily workload. C)monitor resources, costs, quality and budget. D) require equity sources of funding.

B) are outside the normal daily workload.

There are nine phases to a comprehensive project risk assessment and they include steps such as ... A) testing simplifying assumptions, scheduling base plans in activity terms at the detailed level of implementation and controlling structure. B) identify scope, contingency planning, crisis management, cultural control and approval of contractor allocations. C) consolidate information, identify what might go wrong, clarify ownership and identify areas of uncertainty. D) design scenarios, plan, allocate client risk, effectiveness of documentation, and explain opportunities.

C) consolidate information, identify what might go wrong, clarify ownership and identify areas of uncertainty.

Change is made by ... A) external forces. B) processes. C) people. D) systems.

C) people.

One significant cost that is often forgotten is the effect on the time of everyone affected by change. Many people in the organisation will need to give up time to ... A) explain how things work to those involved in designing changes. B) be consulted on the effectiveness and realism of planned change. C) be trained and have changes explained to them. D) all of the above.

D) all of the above.

Which of the following is NOT an aspect of change management? A) understand associated implementation risks. B) achieve performance improvements. C) minimize unplanned operational disruption. D) controlling, scheduling and planning.

D) controlling, scheduling and planning.

The severity of negative consequences in a project's life span is ... A) the period of greatest worry. B) greatest early in the project's life C) unknown until detailed modeling is concluded. D) minimal early in the project's life.

D) minimal early in the project's life.

There are four classic outcomes from change, which reflect the risks and the ways to avoid them. They are; The disaster, the lost investment, the _______ and the ideal. A) redesign success B) unlikely outcome C) complete success D) partial success

D) partial success

There are two alternative ways to use expert opinion in assessing project risks. The more quantifiable method, commonly referred to as the ________ approach, collects and consolidates the judgments of isolated anonymous respondents.

Delphi

(T/F) An arithmetic gradient series is a series of receipts or disbursements that starts at zero at the end of the first period and then remains constant from period to period.

False

(T/F) An independent project is acceptable if the present worth is less than zero.

False

(T/F) EV is an acronym for "expected variable".

False

(T/F) Effective interest rate is the conventional method of stating the annual interest rate.

False

(T/F) Efficiency means achieving the organizational goals that have been set.

False

(T/F) If an investment yields a profit, the total investment price will be taxed.

False

(T/F) In the early years of an asset's life, the capital costs per year always dominate total yearly costs.

False

(T/F) In the replacement case where the defender and challenger are identical, it is not necessary to assume that the two options are technologically identical.

False

(T/F) On a cash flow diagram, the vertical arrows pointing upwards represent a negative cash flow.

False

(T/F) Prices of goods and services bought and sold over time by individuals and firms generally remain constant over time.

False

(T/F) The IRR method cannot be used to determine which of a group of mutually exclusive alternatives to accept.

False

(T/F) The following are all typical middle management job titles: plant manager, operations manager, and office manager.

False

(T/F) The payback period method will always give results consistent with rate of return or present/annual worth methods.

False

(T/F) When future inflation is expected over the life of the project, the MARR needs to be decreased.

False

(T/F)A license fee is an example of an incremental cost.

False

An ideal outcome from a change is deliverables designed so they are compatible with those parts of operations which are not changing: the right change, implemented in the right way, at the right time

One of the most important activities of change management is developing a compelling case for change(s), and championing the change until it is complete

One of the most important activities of change management is assessing the key risks from change, and ensuring action is taken to manage these risks, including the longer-term execution risks.

One of the most important activities of change management is selecting and prioritizing the optimal change(s) to undertake at any time, balancing short term operational needs with long term strategic vision

An ideal outcome from a change is when the risks from change (or every component of change) are understood and appropriate mitigating activities are put in place

There are two main dimensions to every change: the human dimension dealing with the responses of individuals, and organizational dimension ensuring the change is compatible with your operations

(T/F) An assumption required by the principle of discrete compounding is that the compounding periods are of equal length.

True

(T/F) Capital cost is incurred by the difference between what is paid for the asset and what the asset could be resold for some time after purchase.

True

(T/F) Capital purchases cannot usually be fully claimed as an expense in the year in which the purchase occurred.

True

(T/F) Compound interest takes the interest accumulated in one interest period and adds it to the principle amount used to calculate interest in the next period.

True

(T/F) If there are several independent projects, the IRR for each is calculated separately.

True

(T/F) Material costs are an example of costs that are typically included in an engineering economy study.

True

(T/F) Savings (reducing expenses) increase the profits of a firm and therefore they are taxed.

True

(T/F) Sunk costs are irrelevant to any decision to replace the current asset.

True

(T/F) The external rate of return (ERR) is the rate of return on a project where any cash flows that are not invested in the project are assumed to earn interest at a predetermined explicit rate.

True

(T/F) The general Price-Demand relationship can be expressed as a linear function.

True

(T/F) The inflation rate is the rate of increase in average prices of goods and services over a specified time period, usually a year.

True

(T/F) The payback period is the number of years it takes for an investment to be recouped when the interest rate is assumed to be zero.

True

(T/F) The present worth of any money invested in the MARR is zero.

True

A set of equal disbursements or receipts over a sequence of periods, is referred to as a(n) _______. a) Annuity b) Single Disbursement c) Geometric gradient series d) Arithmetic gradient series

a) Annuity

One reason why perfect monopolies rarely occur in practice is because: a) Few products are so unique that substitutes cannot be used. b) A large number of vendors can supply the same product. c) Additional suppliers can enter the marker freely d) People usually stop buying the product before this occurs.

a) Few products are so unique that substitutes cannot be used.

A company evaluating projects will set for itself a lower limit for investment acceptability known as the _______. a) Minimum acceptable rate of return b) Present worth c) Payback period d) Annual worth

a) MARR

To determine the after-tax first cost of an asset for a complete present-worth tax calculation, one must multiply the first cost by: a) The CTF b) The CSF c) (1-t) d) The MARR

a) The CTF

Decisional equivalence is a consequence of the __________ on the part of a decision maker among available choices. a) indifference b) market analysis c) study of general economic activity levels within an industry d) understanding

a) indifference

The economic life of an asset is found at the point where the rate of increase in operating and maintenance costs per period _______ the rate of decrease in capital costs per period. a) is greater than b) equals c) is less than d) crosses e) None of the above

a) is greater than

________ are costs that are difficult to attribute or allocate to a specific output or work activity. a) standard costs b) indirect costs c) variable costs d) sunk costs

b) indirect costs

The CCA system specifies the ______ rate a firm can use to depreciate its assets for tax purposes, known as the CCA Rate. a) Minimum b) Maximum c) Only d) Average

b) Maximum

Actual dollars, sometimes called current or nominal dollars are expressed ________ a) as a ratio of future dollars normalized to the consumer price index. b) at the time the cash flow occurs. c) as the numerical value of the consumer price index. d) in terms of constant purchasing power. e) None of the above

b) at the time the cash flow occurs.

(T/F) Models of cash flows which assume that all cash flows and all compounding of cash flows occur at the ends of conventionally defined periods are called __________. a) continuous model b) discrete model c) irregular model d) end of period models

b) discrete model

In project evaluation, we cannot make comparisons of ________ across time without taking the price changes into account. a) cash flows b) dollar values c) interest rates d) accounting systems e) None of the above

b) dollar values

The costs discussed in the chapter on replacement decisions can be related to the more general ideas of _________ and ________ costs. a) increasing, decreasing b) fixed, variable c) primary, secondary d) None of the above e) All of the above

b) fixed, variable

__________ is the use of historical cost data and statistical techniques to predict future costs. a) power-sizing b) parametric cost estimating c) selected estimating d) historical estimating

b) parametric cost estimating

The ______ can also be used for the annual worth method if the assumption of being able to indefinitely repeat the choice of alternatives is not justified. a) Payback period b) Study period c) MARR d) Independent project

b) study period

______ is an approach to project evaluation that can be used to gain a better understanding of how uncertainty affects the outcome of the evaluation by examining how sensitive the outcome is to changes in the uncertain parameters. a) Break even analysis b) Cash flow analysis c) Sensitivity analysis d) Replacement analysis e) All of the above

c) Sensitivity analysis

Market equivalence is a consequence of the ability to _________ one cash flow for another at zero cost. a) understand b) predict impact of c) exchange d) analyse

c) exchange

Typically a price index relates the average price of a given set of ________ in some time period to the average price of the same ________ in another period. a) weightings b) prices c) goods d) stocks e) None of the above

c) goods

Personal income taxes usually exhibit a: a) Constant tax rate b) Proportional tax rate c) Progressive tax rate d)Flat tax rate

c) progressive tax rate

The meaning of multiple roots is seen most easily with the concept of __________. a) Net cash flows b) Project comparison c) Project balance d) End of period models

c) project balance

The rollback procedure on a decision tree is executed _________. a) top to bottom b) left to right c) right to left d) in any order e) highest value to lowest value

c) right to left

It is _______ true that capital cost per year falls with increasing life. a) always b) rarely c) usually d) never e) None of the above

c) usually

The cost of capital for large companies is an average of the costs of borrowing and of selling shares, which is referred to as the ___ average cost of capital. a) total b) annual c) weighted d) acceptable

c) weighted

Which of the following are steps for computing the ERR that belong to a more convenient, but approximate procedure than finding a precise ERR? a) Take all net receipts forward at the MARR to the times of the last cash flow. b) Take all net disbursements forward at an unknown interest rate also to the time of the last cash flow. c) Equate the future value of the receipts from the first step of the procedure to the future value of the disbursements for the second step of the procedure and solve for . d) All of the above

d) All of the above

You should invest in any project that has an IRR equal to or exceeding the ______. a) Annual worth b) Total cost c) Salvage cost d) MARR

d) MARR

If the lives of alternatives are not the same, one can transform them to equal lives using: a) The payback period b) The total cost method c) The salvage cost d) Repeated lives

d) Repeated lives

To judge whether an index is appropriate for a particular purpose, the analyst should know how the ________ a) the price elasticity model of units of demand works. b) accounting practices have changed resulting from a government requirement to change rules from GAAP to the IFRS system. c) interest rate for which he or she is estimating inflation compare with the set of interest rates use to compute the index. d) goods and services for which he or she is estimating inflation compare with the set of goods and services use to compute the index. e) None of the above

d) goods and services for which he or she is estimating inflation compare with the set of goods and services use to compute the index.

The base unit of time over which an interest rate is calculated is called the _______. a) interest duration b) time period c) interest cycle d) interest period

d) interest period

A line manager at AB Engineering Inc. has initiated a mentorship program to guide and motivate new employees. Within the context of the management process, this is an example of _______________ . a) planning b) scheduling c) controlling d) leading

d) leading

Organizing involves __________. a) developing tactical plans from strategic plans. b) the process of monitoring a firm's performance c) the human resources department d) mobilizing the resources that are required to complete a particular task

d) mobilizing the resources that are required to complete a particular task

When alternatives for accomplishing a specific task are being compared over one year or less (time value of money is ignored) they can be referred to as: a) engineering comparisons b) opportunity costs c) cost concepts d) present economy studies

d) present economy studies

Mathematical equivalence is a consequence of the mathematical relationship between _______. a) First cost and salvage value b) Sunk costs and opportunity cost c) Depreciation and market value d) time and money

d) time and money

Establishing change management as part of risk management strategies also requires a useful _________________ system that all partners in the project can access.

documentation

Once project risk analysis has been completed, it is important to begin developing a reporting and _________________ system for cataloging and future reference.

documentation

Management is the process of __________. a) Planning b) Organizing c) Leading d) Controlling e) All of the above

e) All of the above

Purchase of a long-lived asset implies which of the following? a) Capital cost b) Maintenance cost c) Operating cost d) Installation cost e) All of the above

e) All of the above

Controlling is the process of __________. a) establishing standards b) monitoring a firm's performance c) assessing if performance matches standards d) adjusting performance standards e) all of the above

e) all of the above