How to Make this an Easy Course All the problems are done the same way If I offered you $100 now or $100 when you graduate which would you choose? Money has the ability to gratify - people want to be gratified now - you have to give them something more to make them put-off gratification With money this is usually done by giving people more money later

The Pattern All engineering econ problems involve writing down a list of the money you make and the money you spend The list is written down in order of when the “cash flows” occur –usually this means money spent or earned each year

Example Right now I spend $100 to buy stock in Pee Wee Herman’s Bicycle Company At the end of the year get a dividend check for $10. At the end of the next five years after that I get a dividend check for $10 Then at the end of the sixth year I sell my stock (after I get the dividend check of course) for $150.

Example This is written down like so –0 -$100 –1 +$10 –2 + $10 –3 + $10 –4 +$10 –5 +$10 –6 +$10 + $150 I call this a cash flow

I Can Also Draw Pretty Pictures $100 +$10 +$10 +$150 Note that the X axis tells me when the money moved. Above or below the axis tells me whether the money moved in or out of my pocket.

Example Continued I multiply each number in the cash flow by a magic factor that converts it into an equal amount of money right now. –-$100 * Magic1 –+$10 * Magic2 –+$10 * Magic3 –+$10 * Magic4 –+$10 * Magic5 –+$10 * Magic6 –+$160 * Magic7

Example Continued Then I add up all the numbers and get a total Smart (Greedy) people then look at the pile of money and decide whether it is big enough to make them invest All engineering econ problems are done by writing down a cash flow, multiplying by magic factors, and adding up the total A very simple concept surrounded by bull pucky