CPE Project Management & Engineering Economics Flashcards

What does the term 'net present value' (NPV) mean in engineering economics?

Answer: The current worth of all future cash flows discounted at a required rate of return

NPV discounts all future project cash flows to the present using a required rate of return; a positive NPV indicates the project adds value.

In a capital project, what is a 'Work Breakdown Structure' (WBS)?

Answer: A hierarchical decomposition of the project scope into manageable deliverables and work packages

A WBS divides total project scope into smaller, controllable components to facilitate planning, cost estimating, and progress tracking.

What is the 'critical path' in project scheduling?

Answer: The longest sequence of dependent tasks that determines the minimum project duration

The critical path is the longest chain of dependent activities; any delay on the critical path directly extends the overall project finish date.

Which contract type places the greatest financial risk on the contractor?

Answer: Lump-sum (fixed-price) contract

In a lump-sum contract the contractor agrees to complete the scope for a fixed price, bearing the risk of cost overruns if actual costs exceed the bid.

What is 'straight-line depreciation' for a capital asset?

Answer: Distributing the asset's cost evenly over its useful life in equal annual amounts

Straight-line depreciation divides the depreciable cost (purchase price minus salvage value) equally across each year of the asset's expected useful life.

A Gantt chart is primarily used in project management to:

Answer: Visualize the project schedule by showing task durations and timelines in bar format

A Gantt chart displays project activities as horizontal bars on a timeline, making it easy to see task durations, sequences, and overall schedule.