Lottery & BMW

I won the lottery!

I am crazy about BMW’s! Especially X5.
BMW X5 xDrive35d or BMW X5 xDrive35i?
Which one to choose?
How should I choose?

Slide Sets to accompany Blank & Tarquin, Engineering © 2005 by McGraw-Hill, New York, N.Y All Rights Reserved
Economy, 6th Edition, 2005 1-1
 Lottery & BMW

1st thing: Buying a BMW with lottery prize

does not mean it’s free, at least for an
industrial engineer: Opportunity Cost.
2nd thing: criteria
 Purchase price
 Period to use
 Salvage
 Running cost
 etc.
Slide Sets to accompany Blank & Tarquin, Engineering © 2005 by McGraw-Hill, New York, N.Y All Rights Reserved
Economy, 6th Edition, 2005 1-2
 Lottery & BMW

Stupid question that you can face with in

Turkey:
 How many kilometers do you make each year?
 The guy immediately recommends one of the
options based on just this value.
Let’s see

Slide Sets to accompany Blank & Tarquin, Engineering © 2005 by McGraw-Hill, New York, N.Y All Rights Reserved
Economy, 6th Edition, 2005 1-3
 Lottery & BMW

BMW X5 xDrive35d BMW X5 xDrive35i

MSRP: $57,600 MSRP: $47,500

Slide Sets to accompany Blank & Tarquin, Engineering © 2005 by McGraw-Hill, New York, N.Y All Rights Reserved
Economy, 6th Edition, 2005 1-4
 Lottery & BMW

BMW X5 xDrive35d BMW X5 xDrive35i

TCO: $69,144 TCO: $67,116

Surprised????
Slide Sets to accompany Blank & Tarquin, Engineering © 2005 by McGraw-Hill, New York, N.Y All Rights Reserved
Economy, 6th Edition, 2005 1-5
 Lottery & BMW

BMW X5 xDrive35d BMW X5 xDrive35i

Slide Sets to accompany Blank & Tarquin, Engineering © 2005 by McGraw-Hill, New York, N.Y All Rights Reserved
Economy, 6th Edition, 2005 1-6
Engineers should use
 Numbers
 Units
carefully and correct!
Engineers do not have any excuse to come up
with no solution!

Slide Sets to accompany Blank & Tarquin, Engineering © 2005 by McGraw-Hill, New York, N.Y All Rights Reserved
Economy, 6th Edition, 2005 1-7
 Sct 1: Why Engineering Economy is
Important to Engineers

 Engineers “design” and create

 Designing involves economic decisions
 Engineers must be able to incorporate
economic analysis into their creative efforts
 Often engineers must select and execute from
multiple alternatives
 A proper economic analysis for selection and
execution is a fundamental aspect of
engineering
Slide Sets to accompany Blank & Tarquin, Engineering © 2005 by McGraw-Hill, New York, N.Y All Rights Reserved
Economy, 6th Edition, 2005 1-8
 Engineering Economy

 The art and science that involves:

 Formulating,
 Estimating and
 Evaluating economic outcomes
 Always concerned with the selection and
possible execution of alternatives given the
economic parameters associated with the
project

Slide Sets to accompany Blank & Tarquin, Engineering © 2005 by McGraw-Hill, New York, N.Y All Rights Reserved
Economy, 6th Edition, 2005 1-9