Deck 18: Life-Cycle Costing

Question 1

The expression (1 + i )^N in the compound interest formula is known as the "____."

A)compound amount factor
B)compound cost factor
C)compound principal factor
D)simple compound accumulation

Answer 1

A

Question 2

In life-cycle costing, the compounding period will usually be _______.

A)daily
B)weekly
C)bi-monthly
D)annual or monthly

Answer 2

D

Question 3

Life-cycle costing ensures that the best alternatives are chosen during the design process.

Answer 3

True

Question 4

The ____ that an investor will accept on the life-cycle costing proposals he is considering will be the discount rate used in the costing calculations.

A)LARR
B)MAPP
C)LAPP
D)MARR

Question 5

Because the costs of goods and services tend to rise over time, the value of money declines with time; this process is referred to as "____."

A)value deflation
B)completion inflation
C)price inflation
D)gross inflation

Question 6

In ____, the analysis typically involves evaluation of the present worth of some future expenses to decide whether the investor should spend an extra sum now to reduce those future expenses.

A)value costing
B)life-cycle costing
C)delivery costing
D)opportunity costing

Question 7

Compounding periods can be years, months, days, or any other discrete time period.

Question 8

If you decide to invest your cash in a construction project, you will be forgoing the returns from an alternative project; this is known as the ____ of the funds.

A)opportunity cost
B)delivery cost
C)alternative cost
D)deferred cost

Question 9

The value adopted for the discount rate has a minimal effect on the outcome of the life-cycle costing analysis.

Question 10

One way in which price inflation can be accounted for is by calculating all future cash flows using "today's" dollars and using an adjusted interest rate.

Question 11

Economic decision analysis in the construction industry is referred to as the ____.

A)delivery costing technique
B)value costing technique
C)life-cycle costing technique
D)minimal costing technique

Question 12

When using EUAC analysis, it is necessary to use multiple lives when the life spans of alternatives are not equal.

Question 13

A major advantage to using present worth analysis is that alternatives do not have to be considered over the same time period as they do with equivalent uniform annual cost analysis.

Question 14

The process of ____ treats design decisions as investments, taking into account outlays and payback over the life of these investments.

A)delivery costing
B)life-cycle costing
C)value costing
D)minimal costing

Question 15

Price inflation can be accounted for in two ways, one of which is to express future cash amounts in "then current" dollars and use an interest rate that takes inflation into account.

Question 16

Because LCC treats design decisions as ____, we need to account for compound interest since interest will accrue not only on the original amount but also on the interest that is paid.

A)expenses
B)deferrals
C)overhead
D)investments

Question 17

Another factor that can have a significant influence upon the discount rate used in life-cycle costing is the expected rate of ____.

A)inflation
B)depreciation
C)appreciation
D)devaluation

Question 18

Compounding periods can be years, months, days, or any other discrete time period.

Question 19

Life-cycle costing often involves situations where the investor is faced with a number of mutually exclusive alternatives.

Question 20

Interest rates are usually stated as a (an)____________.

A)amount per year
B)daily accrual
C)amount per month
D)compounding factor