In context to the objectives of engineering economics pick up the correct statement from the followi

Question

In context to the objectives of engineering economics pick up the correct statement from the following.
(i) It is collection of mathematical techniques that satisfies economic comparison of different alternatives.
(ii) It is a decision assistance tool by which one method will be chosen as the most economically one.
(iii) It requires understanding of basic terminology and fundamental concepts of economy.

Examoogle · Accepted Answer

(i), (ii) and (iii)

Explanation: Engineering economics is a specialized branch of economics that integrates engineering design and analysis with systematic economic evaluation. It provides the necessary quantitative framework to compare different technological alternatives based on their capital requirements, operational costs, and lifecycle benefits to ensure optimal financial resource utilization.

Working Principle: The principle relies on the Time Value of Money (TVM) and the systematic application of cash flow analysis. By converting all future costs and benefits to a Present Value ($PV$) or Annual Equivalent ($AE$), an engineer can objectively rank alternatives using metrics like Net Present Value ($NPV$), Internal Rate of Return ($IRR$), or Benefit-Cost Ratio ($BCR$).

Key Formulas: $PV = \frac{FV}{(1+i)^n}$ — Present Value calculation for discounting future cash flows; $NPV = \sum_{t=0}^{n} \frac{R_t}{(1+i)^t}$ — Net Present Value of an investment

Key Points: It bridges the gap between technical design and financial viability.; Mathematical models like compound interest and depreciation are central to the field.; Decision making is based on long-term value rather than just initial capital investment.; Fundamental economic literacy is required for risk assessment and sensitivity analysis.

Advantages: Reduces financial risk in capital-intensive projects; Provides a standardized logic for project selection

Disadvantages: Predicting future interest rates and market trends involves uncertainty; Social and environmental impacts are sometimes difficult to quantify monetarily

Applications: Capital Budgeting; Equipment Replacement Analysis; Project Feasibility Studies

Additional Info: Engineering economics is vital for ensuring that engineering solutions are not only technically sound but also economically efficient.. Statement (i) reflects the analytical aspect, (ii) reflects the outcome/managerial aspect, and (iii) defines the conceptual requirement.

Answer: D is correct — All three statements represent the core pillars: mathematical rigor (i), managerial decision-making (ii), and foundational knowledge (iii) essential for engineering economics.

Exam Tip: Focus on the relationship between IRR and the discount rate; if $IRR > 	ext{MARR}$ (Minimum Attractive Rate of Return), the project is typically considered economically viable.

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