AALL10 · Chapter 10Project Planning & Implementation🏛️ Past Licensure QuestionID: 7775af5d
In engineering economics, the minimum acceptable rate of return on investment that an enterprise requires before committing capital to a project is known as:
In engineering economics, the minimum acceptable rate of return on investment that an enterprise requires before committing capital to a project is known as:
Multiple Choice Options
- A
Internal Rate of Return (IRR)
- B✓ Correct Option
Minimum Attractive Rate of Return (MARR) / Hurdle Rate
- C
External Rate of Return (ERR)
- D
None of these
Detailed Technical Solution & Explanation
The Minimum Attractive Rate of Return (MARR), also known as the hurdle rate or cutoff rate, is the minimum discount rate acceptable to an investor or corporate management when selecting engineering projects. A project is economically justified if its Internal Rate of Return () is greater than or equal to .
Option Analysis:
•
Option A (Internal Rate of Return (IRR)): The intrinsic discount rate where NPV equals zero.
•
Option B (Minimum Attractive Rate of Return (MA...): Correct. Minimum Attractive Rate of Return established by management.
•
Option C (External Rate of Return (ERR)): External Rate of Return, an alternative formulation when reinvestment differs from IRR.
•
Option D (None of these): Incorrect.
Reference: Mock Test 05NEC Licensure Syllabus