NCEES PE Agricultural and Biological Engineering · USA · NCEES (ASABE is the content partner)
Original practice questions written to the published syllabus · not past papersMoney and time in engineering decisions: discounting, costs, break-even, project appraisal, scheduling and starting a business.
In the exams: NCEES FE Engineering Economics 6–9 questions; NCEES PE engineering economics and project management; ICAR AICE subject 41 Unit 10; PRC ABE project management
How our questions for NCEES PE Agricultural and Biological Engineering spread across the units of Engineering Economics, Project & Business Management. Difficulty: 2 easy, 15 medium, 12 hard.
| Fixed and variable costs | 9 | |
| Replacement analysis | 6 | |
| Time value of money | 3 | |
| NPV, IRR, benefit-cost ratio and payback | 3 | |
| Depreciation methods | 2 | |
| Break-even analysis | 2 | |
| Project appraisal and detailed project reports | 2 | |
| Linear programming | 1 | |
| Entrepreneurship and marketing | 1 |
Choose an answer, then open the working. Each explanation says why the right answer is right and why the others are not.
A project's benefits are forecast in constant prices of the base year. At which rate should they be discounted?
C. At the real interest rate, which excludes inflation just as constant-price cash flows do
The rule is consistency: constant (real) cash flows at the real rate, actual (then-current) cash flows at the market rate, which already contains inflation. Discounting constant-price benefits at the market rate removes inflation twice and understates worth; adding inflation to the market rate makes the error worse.
A public irrigation scheme has present worth of benefits 5.2 million, first cost 3.0 million and present worth of operation and maintenance cost 1.0 million. Using the modified benefit-cost ratio, in which O&M cost is deducted from benefits, what is the ratio?
C. 1.40
Modified B/C = (benefits − O&M)/first cost = (5.2 − 1.0)/3.0 = 1.40. 1.30 is the conventional ratio, benefits/(first cost + O&M) = 5.2/4.0; 1.73 omits O&M entirely; 1.05 counts O&M on both sides, (5.2 − 1.0)/(3.0 + 1.0). Both correct forms agree that B/C > 1, so the scheme is acceptable.
Machine X costs 600,000, lasts 5 years, has salvage 100,000 and costs 80,000 a year to run. Machine Y costs 900,000, lasts 10 years, has salvage 150,000 and costs 60,000 a year to run. At 10 %, which has the lower equivalent annual cost?
A. Y, at about 197,100 a year against about 221,900 for X
EUAC_X = 600,000(A/P,10 %,5) − 100,000(A/F,10 %,5) + 80,000 = 221,899; EUAC_Y = 900,000(A/P,10 %,10) − 150,000(A/F,10 %,10) + 60,000 = 197,059. Y is cheaper. Annual cost compares unequal lives directly under the repeatability assumption, so no extra study period is needed; first cost alone ignores life and running cost.
Owning a paddy transplanter costs 150,000 a year in ownership cost plus 900 per hectare to operate. A contractor charges 2,400 per hectare. Above what annual area is owning cheaper than hiring?
D. 100 ha
Set 150,000 + 900A = 2,400A, so A* = 150,000/(2,400 − 900) = 100 ha. Above 100 ha owning is cheaper. 62.5 ha ignores the owner's operating cost; 166.7 ha divides by the operating cost; 45.5 ha adds the two rates.
An electric pump set has annual fixed costs of 60,000 and running cost 15 per hour; a diesel set has fixed costs of 20,000 and running cost 55 per hour. Which statement is correct?
B. The electric set is cheaper for any use above 1,000 hours of pumping a year
Equal annual cost: 60,000 + 15h = 20,000 + 55h, so h = 40,000/40 = 1,000 h. Above that, the electric set's lower running cost outweighs its higher fixed cost; below it, diesel is cheaper. Any first costs should be converted to annual amounts with the capital recovery factor before this comparison.
A defender's marginal cost of keeping it one more year is 140,000 and rising each year. The best challenger has a minimum equivalent annual cost of 150,000 at its economic life. What should be done?
C. Keep the defender for at least one more year and repeat the comparison next year
The defender is cheaper for the coming year (140,000 < 150,000), so keeping it saves money now. Because its marginal cost is rising, it will soon exceed 150,000, and the comparison should be repeated each year. Book depreciation and novelty are not decision criteria.
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