23-CS-1 Engineering Economics · May 2018
Nivaar worked solution (AI-drafted; not reviewed by a licensed engineer)
National Exams — May 2018 — 11-CS-1 Engineering Economics. Open book; non-communicating calculator permitted. Any four of the five questions constitute a complete paper; all questions are of equal value. Fully worked solutions to all five follow; standard compound-interest factors are used and minor rounding is immaterial.
Question text not reproduced: the examination questions are © Engineers and Geoscientists BC. Open the official past paper (linked at the top of this page) to read the question, then follow the worked solution below.
Each stands alone; accept any whose overall IRR ≥ 16%: A (19% ✓), B (15% ✗), C (18% ✓), D (16% ✓, at the margin). Select A, C, and D. B is rejected.
Use incremental IRR, ordering by first cost (A<B<C<D). All overall IRRs exceed 14%, so A (cheapest acceptable) is the initial defender.
| Increment | IRR | vs MARR 14% | Decision |
|---|---|---|---|
| B − A | 11% | < 14% | Reject B; keep A |
| C − A | 17% | > 14% | Accept; C is defender |
| D − C | 13% | < 14% | Reject D; keep C |
When a single percentage return is wanted to compare against the MARR or cost of capital; when the exact MARR is uncertain (the IRR gives the break-even rate); and when communicating results to management or investors, who read percentages more readily than dollar worths.
No. Here A has the highest overall IRR (19%) yet C is the correct choice. A larger investment can be justified when its increments earn at least the MARR, even though doing so lowers the average percentage return. Mutually exclusive alternatives must be ranked by incremental ROR (equivalently, by maximum present worth), never by standalone IRR.
