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Cost Benefit Analysis – Hybrid Cars

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Cost Benefit Analysis – Hybrid Cars

  1. 1. Cost Benefit Analysis – Hybrid Cars <ul><ul><li>Presented by </li></ul></ul><ul><ul><li>Mukesh Kakkar </li></ul></ul><ul><ul><li>Jeff Graebner </li></ul></ul><ul><ul><li>James Lepp </li></ul></ul>
  2. 2. Agenda <ul><li>What is Cost Benefit Analysis (CBA) </li></ul><ul><li>Costs and Benefits </li></ul><ul><li>Applications of CBA </li></ul><ul><li>Steps involved </li></ul><ul><li>Process Flow </li></ul><ul><li>Hybrids </li></ul><ul><li>Functioning </li></ul><ul><li>Consumer opinion </li></ul>
  3. 3. Cost & Benefits <ul><li>Benefits are primary positive outcomes or consequences </li></ul><ul><li>Costs are value of the resources that must be used to develop, implement, and operate the program being analyzed </li></ul>
  4. 4. Application of CBA <ul><li>Whether or not project should be undertaken </li></ul><ul><li>Could the project be viable in future </li></ul><ul><li>Which among many competing alternatives and projects should be funded given a limited budget. </li></ul>
  5. 5. CBA Drill-down tree Cost Benefit Analysis Costs Benefits Direct Costs ( resources budgeted) Tangible Benefits Indirect Costs (not budgeted) Intangible Benefits Positive benefits Negative benefits Personnel Facilities, equipment, and materials Other Lost time litigation Health/Pension benefits revenue Goodwill Knowledge gained Attitude Changed Process improvements Benefits to society and environment Opportunity Cost
  6. 6. CBA Process Flowchart Establish Objectives Identify Constraints Identify Assumptions Define Base case Set Analysis period Define Alternatives Define level of effort Estimate benefits and cost relative to base case Evaluate risks Compare net benefits and establish ranks Recommendations
  7. 7. Hybrid Vehicles
  8. 8. Functioning
  9. 9. Opinions- facts or fiction
  10. 11. Gas Prices
  11. 12. Regressions <ul><li>Moving Average </li></ul><ul><li>Simple Regression </li></ul><ul><li>Holt-Winters </li></ul><ul><li>Multiple Regression (3) </li></ul><ul><li>Time Series Decomposition </li></ul><ul><li>ARIMA </li></ul>
  12. 13. Multiple Regression <ul><li>Dependent Variable </li></ul><ul><ul><li>Gas Price </li></ul></ul><ul><li>Independent Variables </li></ul><ul><ul><li>Significant </li></ul></ul><ul><ul><ul><li>Consumer Price Index (CPI) </li></ul></ul></ul><ul><ul><ul><li>Average number of miles traveled per vehicle </li></ul></ul></ul><ul><ul><ul><li>9/11 – dummy variable </li></ul></ul></ul><ul><ul><ul><li>Hurricane Katrina – dummy variable </li></ul></ul></ul><ul><ul><ul><li>War in Iraq – dummy variable </li></ul></ul></ul><ul><ul><ul><li>Quarters – dummy variables </li></ul></ul></ul><ul><ul><li>Insignificant </li></ul></ul><ul><ul><ul><li>Total number of hybrids on the road </li></ul></ul></ul><ul><ul><ul><li>Total number of light vehicles on the road </li></ul></ul></ul><ul><ul><ul><li>Personal Income </li></ul></ul></ul><ul><ul><ul><li>Motor Vehicle Output </li></ul></ul></ul>
  13. 14. Statistics 1.00 0.04 0.04 Yes Q3 3.00 0.04 0.11 Yes Q2 -0.27 0.04 -0.01 Yes Q1 6.79 0.92 6.23 Yes Iraq War 3.57 0.07 0.25 Yes Katrina -3.74 0.04 -0.16 Yes 9/11 6.89 0.00 0.00 Yes Miles Vehicles Traveled 9.88 0.01 0.05 Yes CPI -8.44 1.63 -13.76 Dependent Gas Price T-test Error Coefficient in Model Description Standard Included Series   Audit Trail -- Coefficient Table (Multiple Regression Selected) 96.60% Adjusted R-Square 97.78% R-Square 2.38% Mean Absolute Percentage Error (MAPE) -72.47 BIC -73.65 AIC Value   Accuracy Measures 82.68 F-test Overall
  14. 15. Forecast $3.75 2010 $3.47 2009 $3.19 2008 $2.91 2007 $2.73 2006 Gas Price Year
  15. 16. Vehicles Used in Study Honda Accord Honda Accord Hybrid Toyota Corolla LE Toyota Prius Toyota Highlander Ltd Toyota Highlander Hybrid Ltd Lexus RX 330 Lexus 400 Hybrid Honda Civic EX Honda Civic Hybrid Ford Escape Ford Escape Hybrid
  16. 17. Benefits of a Hybrid <ul><li>Savings at the Pump </li></ul><ul><ul><li>All Hybrids get a better fuel economy than their counterparts </li></ul></ul><ul><li>Lower Insurance Rates </li></ul><ul><ul><li>Drop of 5 to 10% </li></ul></ul><ul><li>Government Assistance </li></ul><ul><ul><li>Federal Tax credit </li></ul></ul><ul><ul><li>Coase Theorem </li></ul></ul><ul><ul><ul><li>Take a decentralized approach to environmental pollution </li></ul></ul></ul><ul><li>Lower Emissions </li></ul><ul><ul><li>Less Carbon Monoxide adding to Global Warming </li></ul></ul><ul><li>Self-Powering Engines </li></ul><ul><ul><li>No hassle in finding a plug </li></ul></ul><ul><li>Special Car-Pool Lanes </li></ul><ul><ul><li>No matter how many people are in the car </li></ul></ul>
  17. 18. Costs of a Hybrid <ul><li>General Maintenance and Repair </li></ul><ul><ul><li>Even though it does have an electric engine it is still needed </li></ul></ul><ul><li>New Batteries </li></ul><ul><ul><li>Need to be changed out every 8 to 10 years </li></ul></ul><ul><li>Higher Depreciation Rate </li></ul><ul><ul><li>Expected as 1 to 4% higher </li></ul></ul><ul><li>Higher Initial Cost </li></ul><ul><ul><li>Between $4,000 and $9,000 </li></ul></ul>
  18. 19. Inside the Numbers $56     w/o federal tax credits $2,156     with federal tax credits $1,163 8,669 9,832 Projected resale price   53.00% 56.10% Five-year depreciation rate $630 2,938 3,568 Financing (3%) $0 4,163 4,163 Maintenance & repair $246 4,916 4,670 Insurance (5% savings) $3,511 7,979 4,468 Fuel cost (5 yrs) $2,100 0 2,100 Tax credit $277 1,291 1,568 Sales tax (7%) $3,956 $18,444 $22,400 Purchase price (Automatic) Hybrid extra cost or savings Honda Civic EX (28) Honda Civic Hybrid (50) 5 years
  19. 20. Inside the Numbers (Continued) 45,825 25,662 Total Carbon Monoxide Released 8,510 4,766 238,290 13,000 2010 8,838 4,949 247,455 13,500 2009 9,165 5,132 256,620 14,000 2008 9,492 5,316 265,785 14,500 2007 9,820 5,499 274,950 15,000 2006 28 50       Honda Civic EX Honda Civic Hybrid Carbon Monoxide Emitted Miles Driven Year
  20. 21. The Results -4 $4,141.38 without taxes 1 $1,493.43 with taxes Corolla LE (34) Prius (55) Toyota -6 $6,074.62 without taxes -3 $2,953.00 with taxes Highlander Ltd (25) Highlander Hybrid Ltd (30) Toyota -6 $6,496.78 without taxes -4 $4,296.78 with taxes Rx330 (25) RX400h (30) Lexus 0 $56.36 without taxes 2 $2,156.36 with taxes Civic EX (28) Civic Hybrid (50) Honda -4 $3,901.84 without taxes -3 $3,251.84 with taxes Accord (25) Accord Hybrid (28) Honda -2 $2,450.58 without taxes 4 $3,871.42 with taxes Escape (23) Escape Hybrid (33) Ford Points Costs/Savings Model (mpg) Manufacturer
  21. 22. The Results (Continued) 3 14,409 37,738 23,329   Corolla LE (34) Pirus (55) Toyota 2 8,554 51,324 42,770   Highlander Ltd (25) Highlander Hybrid Ltd (30) Toyota 2 8,554 51,324 42,770   Rx330 (25) RX400h (30) Lexus 4 20,163 45,825 25,662   Civic EX (28) Civic Hybrid (50) Honda 1 5,499 51,324 45,825   Accord (25) Accord Hybrid (28) Honda 3 16,905 55,787 38,882   Escape (23) Escape Hybrid (33) Ford Points Amount Carbon Monoxide Saved Model (mpg) Manufacturer
  22. 23. The Results (Continued) 3 6 Corolla LE (34) Pirus (55) Toyota -4 1 Highlander Ltd (25) Highlander Hybrid Ltd (30) Toyota -4 0 Rx330 (25) RX400h (30) Lexus 6 8 Civic EX (28) Civic Hybrid (50) Honda -1 0 Accord (25) Accord Hybrid (28) Honda 3 9 Escape (23) Escape Hybrid (33) Ford Without Tax Savings Included With Tax Savings Included Costs/Savings Model (mpg) Manufacturer
  23. 24. Questions &quot;An unsophisticated forecaster uses statistics as a drunken man uses lamp-posts - for support rather than for illumination.&quot; —Andrew Lang

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