Cost Benefit Analysis - Hybrid Cars

Cost Benefit Analysis - Hybrid Cars

Cost Benefit Analysis Hybrid Cars Presented by Mukesh Kakkar Jeff Graebner James Lepp Agenda What is Cost Benefit Analysis (CBA) Costs and Benefits Applications of CBA Steps involved Process Flow Hybrids Functioning Consumer opinion Cost & Benefits Benefits are primary positive outcomes or consequences Costs are value of the resources that must be used to develop, implement, and operate the program being analyzed Application of CBA

Whether or not project should be undertaken Could the project be viable in future Which among many competing alternatives and projects should be funded given a limited budget. CBA Drill-down tree Cost Benefit Analysis Costs Direct Costs ( resources budgeted) Benefits Indirect Costs (not budgeted) Tangible Benefits Intangible Benefits revenue Positive benefits Personnel Lost time Goodwill Facilities, equipment, and materials litigation Knowledge gained Other

Health/Pension benefits Attitude Changed Opportunity Cost Process improvements Benefits to society and environment Negative benefits CBA Process Flowchart Establish Objectives Identify Constraints Identify Assumptions Define Base case Define Alternatives Set Analysis period Define level of effort Estimate benefits and cost relative to base case Evaluate risks Compare net benefits and establish ranks Recommendations Hybrid Vehicles Functioning A hybrid car The car moving has Kinet ic ener gy Chemical energy The car braking generat es Elect r ical ener gy

St ored in pet rol Elect rical energy From t he bat t er y Chemical energy St ored in t he bat t ery Opinions- facts or fiction 20 00 -1 20 00 -3 20 01 -1 20 01 -3 20 02 -1 20 02 -3 20 03 -1 20 03 -3 20 04 -1 20 04 -3 20 05

-1 20 05 -3 Gas Price ($) Gas Prices Gas Price 3 2.5 2 1.5 1 0.5 0 Year - Quarter Regressions Moving Average Simple Regression Holt-Winters Multiple Regression (3) Time Series Decomposition ARIMA Multiple Regression Dependent Variable

Gas Price Independent Variables Significant Consumer Price Index (CPI) Average number of miles traveled per vehicle 9/11 dummy variable Hurricane Katrina dummy variable War in Iraq dummy variable Quarters dummy variables Insignificant Total number of hybrids on the road Total number of light vehicles on the road Personal Income Motor Vehicle Output Statistics Audit Trail -- Coefficient Table (Multiple Regression Selected) Series Standar d

Included Description in Model Coefficien t Gas Price Dependen t -13.76 1.63 -8.44 Error T-test CPI Yes 0.05 0.01 9.88 Miles Vehicles Traveled Yes 0.00 0.00 6.89

9/11 Yes -0.16 0.04 -3.74 Katrina Yes 0.25 0.07 3.57 Iraq War Yes 6.23 0.92 6.79 Yes -0.01 Value 0.11 -73.65 0.04 -72.47 0.04 -0.27 0.04

3.00 0.04 Overall1.00 Q1 Accuracy Measures Q2 AIC Q3 BIC Yes Yes Mean Absolute Percentage Error (MAPE) 2.38% R-Square 97.78% Adjusted R-Square 96.60% F-test 82.68 Forecast Gas Price 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 1

3 4 5 8 0 0 2 6 7 9 1 2 3 4 5 6 7 8 9 0 1 -0 -0 -0 -0 -0 -0 -0 -0 -0 -1 -1 l-0 l-0 l-1 l-0 l-0 l-0 l-0 l-0 l-0 l-0 l-0 n n

n n n n n n n n n u u u u u u u u u u u J J J J J J J J J J J Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Gas Price

Forecast of Gas Price Year Gas Price 2006 $2.73 2007 $2.91 2008 $3.19 2009 $3.47 2010 $3.75 Fitted Values Vehicles Used in Study Ford Escape Hybrid Ford Escape Honda Accord Hybrid Honda Accord Honda Civic Hybrid Honda Civic EX Lexus 400 Hybrid Lexus RX 330

Toyota Highlander Hybrid Ltd Toyota Highlander Ltd Toyota Prius Toyota Corolla LE Benefits of a Hybrid Savings at the Pump All Hybrids get a better fuel economy than their counterparts Lower Insurance Rates Drop of 5 to 10% Government Assistance Federal Tax credit Coase Theorem Lower Emissions Less Carbon Monoxide adding to Global Warming Self-Powering Engines

Take a decentralized approach to environmental pollution No hassle in finding a plug Special Car-Pool Lanes No matter how many people are in the car Costs of a Hybrid General Maintenance and Repair Even though it does have an electric engine it is still needed New Batteries Need to be changed out every 8 to 10 years Higher Depreciation Rate Expected as 1 to 4% higher Higher Initial Cost Between $4,000 and $9,000 5 years Purchase price (Automatic) Inside the Numbers Honda Civic Hybrid (50) $22,400 Honda Civic

EX (28) Hybrid extra cost or savings $18,444 $3,956 Sales tax (7%) 1,568 1,291 $277 Tax credit 2,100 0 $2,100 Fuel cost (5 yrs) 4,468 7,979 $3,511 Insurance (5% savings) 4,670 4,916 $246 Maintenance & repair

4,163 4,163 $0 Financing (3%) 3,568 2,938 $630 Five-year depreciation rate 56.10% 53.00% Projected resale price 9,832 8,669 with federal tax credits w/o federal tax $1,163 $2,156 Inside the Numbers (Continued) Year Miles Driven Carbon Monoxide

Emitted Honda Civic Hybrid Honda Civic EX 50 28 2006 15,000 274,950 5,499 9,820 2007 14,500 265,785 5,316 9,492 2008 14,000 256,620 5,132 9,165 2009

13,500 247,455 4,949 8,838 2010 13,000 238,290 4,766 8,510 25,662 45,825 Total Carbon Monoxide Released The Results Model (mpg) Manufacturer Ford Honda Honda Escape Hybrid (33) Escape (23) Accord Hybrid (28) Accord (25) Civic Hybrid (50) Civic EX (28) Costs/Savings

with taxes $3,871.42 4 without taxes $2,450.58 -2 with taxes $3,251.84 -3 without taxes $3,901.84 -4 with taxes $2,156.36 2 $56.36 0 with taxes $4,296.78 -4 without taxes $6,496.78 -6

with taxes $2,953.00 -3 $6,074.62 -6 with taxes $1,493.43 1 without taxes $4,141.38 -4 without taxes Lexus Toyota Toyota RX400h (30) Rx330 (25) Highlander Hybrid Ltd (30) Highlander Ltd (25) Prius (55) Corolla LE (34)

Points without taxes The Results (Continued) Carbon Monoxide Saved Model (mpg) Amount Points Manufacturer Ford Escape Hybrid (33) Escape (23) 38,882 Honda Accord Hybrid (28) 55,787 Lexus Toyota Toyota 3 5,499 1 20,163 4 8,554

2 8,554 2 Accord (25) 51,324 45,825 Honda 16,905 Civic Hybrid (50) Civic EX (28) 25,662 45,825 RX400h (30) Rx330 (25) 42,770 51,324 Highlander Hybrid Ltd (30) Highlander Ltd (25) 42,770 51,324 Pirus (55) Corolla LE (34) The Results (Continued) Costs/Savings

Model (mpg) Manufacturer Ford With Tax Savings Included Without Tax Savings Included 9 3 0 -1 Escape Hybrid (33) Escape (23) Accord Hybrid (28) Accord (25) Civic Hybrid (50) Civic EX (28) 8 6 Lexus RX400h (30)

Rx330 (25) 0 -4 Toyota Highlander Highlander Hybrid Ltd (30) Ltd (25) 1 -4 6 3 Honda Honda Toyota Pirus (55) Corolla LE (34) Questions "An unsophisticated forecaster uses statistics as a drunken man uses lamp-posts - for support rather than for illumination." Andrew Lang

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