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
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
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
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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