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Cost Benefit Analysis – Hybrid Cars Presented by Mukesh Kakkar Jeff Graebner James Lepp.

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Presentation on theme: "Cost Benefit Analysis – Hybrid Cars Presented by Mukesh Kakkar Jeff Graebner James Lepp."— Presentation transcript:

1 Cost Benefit Analysis – Hybrid Cars Presented by Mukesh Kakkar Jeff Graebner James Lepp

2 Agenda What is Cost Benefit Analysis (CBA) What is Cost Benefit Analysis (CBA) Costs and Benefits Costs and Benefits Applications of CBA Applications of CBA Steps involved Steps involved Process Flow Process Flow Hybrids Hybrids Functioning Functioning Consumer opinion Consumer opinion

3 Cost & Benefits Benefits are primary positive outcomes or consequences 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

4 Application of CBA Whether or not project should be undertaken Whether or not project should be undertaken Could the project be viable in future Could the project be viable in future Which among many competing alternatives and projects should be funded given a limited budget. Which among many competing alternatives and projects should be funded given a limited budget.

5 CBA Drill-down tree Cost Benefit Analysis Costs Direct Costs ( resources budgeted) Personnel Facilities, equipment, and materials Other Indirect Costs (not budgeted) Lost time litigation Health/Pension benefits Opportunity Cost Benefits Tangible Benefits revenue Intangible Benefits Goodwill Knowledge gained Attitude Changed Process improvements Benefits to society and environment Positive benefitsNegative benefits

6 Establish Objectives Identify ConstraintsIdentify 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 CBA Process Flowchart

7 Hybrid Vehicles

8 Functioning

9 Opinions- facts or fiction

10

11 Gas Prices

12 Regressions Moving Average Moving Average Simple Regression Simple Regression Holt-Winters Holt-Winters Multiple Regression (3) Multiple Regression (3) Time Series Decomposition Time Series Decomposition ARIMA ARIMA

13 Multiple Regression Dependent Variable Dependent Variable Gas Price Gas Price Independent Variables Independent Variables Significant Significant Consumer Price Index (CPI) Consumer Price Index (CPI) Average number of miles traveled per vehicle Average number of miles traveled per vehicle 9/11 – dummy variable 9/11 – dummy variable Hurricane Katrina – dummy variable Hurricane Katrina – dummy variable War in Iraq – dummy variable War in Iraq – dummy variable Quarters – dummy variables Quarters – dummy variables Insignificant Insignificant Total number of hybrids on the road Total number of hybrids on the road Total number of light vehicles on the road Total number of light vehicles on the road Personal Income Personal Income Motor Vehicle Output Motor Vehicle Output

14 Statistics Audit Trail -- Coefficient Table (Multiple Regression Selected) SeriesIncludedStandard Description in Model CoefficientErrorT-test Gas Price Dependent-13.761.63-8.44 CPIYes0.050.019.88 Miles Vehicles Traveled Yes0.000.006.89 9/11Yes-0.160.04-3.74 KatrinaYes0.250.073.57 Iraq War Yes6.230.926.79 Q1Yes-0.010.04-0.27 Q2Yes0.110.043.00 Q3Yes0.040.041.00 Accuracy Measures ValueAIC-73.65 BIC-72.47 Mean Absolute Percentage Error (MAPE) 2.38% R-Square97.78% Adjusted R-Square 96.60% OverallF-test 82.68

15 ForecastYear Gas Price 2006$2.73 2007$2.91 2008$3.19 2009$3.47 2010$3.75

16 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

17 Benefits of a Hybrid Savings at the Pump Savings at the Pump All Hybrids get a better fuel economy than their counterparts All Hybrids get a better fuel economy than their counterparts Lower Insurance Rates Lower Insurance Rates Drop of 5 to 10% Drop of 5 to 10% Government Assistance Government Assistance Federal Tax credit Federal Tax credit Coase Theorem Coase Theorem Take a decentralized approach to environmental pollution Take a decentralized approach to environmental pollution Lower Emissions Lower Emissions Less Carbon Monoxide adding to Global Warming Less Carbon Monoxide adding to Global Warming Self-Powering Engines Self-Powering Engines No hassle in finding a plug No hassle in finding a plug Special Car-Pool Lanes Special Car-Pool Lanes No matter how many people are in the car No matter how many people are in the car

18 Costs of a Hybrid General Maintenance and Repair General Maintenance and Repair Even though it does have an electric engine it is still needed Even though it does have an electric engine it is still needed New Batteries New Batteries Need to be changed out every 8 to 10 years Need to be changed out every 8 to 10 years Higher Depreciation Rate Higher Depreciation Rate Expected as 1 to 4% higher Expected as 1 to 4% higher Higher Initial Cost Higher Initial Cost Between $4,000 and $9,000 Between $4,000 and $9,000

19 Inside the Numbers 5 years Honda Civic Hybrid (50) Honda Civic EX (28) Hybrid extra cost or savings Purchase price (Automatic) $22,400$18,444$3,956 Sales tax (7%) 1,5681,291$277 Tax credit 2,1000$2,100 Fuel cost (5 yrs) 4,4687,979$3,511 Insurance (5% savings) 4,6704,916$246 Maintenance & repair 4,1634,163$0 Financing (3%) 3,5682,938$630 Five-year depreciation rate 56.10%53.00% Projected resale price 9,8328,669$1,163 with federal tax credits $2,156 w/o federal tax credits $56

20 Inside the Numbers (Continued) YearMilesDrivenCarbonMonoxideEmittedHondaCivicHybridHonda Civic EX 5028 200615,000274,9505,4999,820 200714,500265,7855,3169,492 200814,000256,6205,1329,165 200913,500247,4554,9498,838 201013,000238,2904,7668,510 Total Carbon Monoxide Released 25,66245,825

21 The Results Manufacturer Model (mpg) Costs/SavingsPoints Ford Escape Hybrid (33) Escape (23) with taxes $3,871.424 without taxes $2,450.58-2 Honda Accord Hybrid (28) Accord (25) with taxes $3,251.84-3 without taxes $3,901.84-4 Honda Civic Hybrid (50) Civic EX (28) with taxes $2,156.362 without taxes $56.36 $56.360 Lexus RX400h (30) Rx330 (25) with taxes $4,296.78-4 without taxes $6,496.78-6 Toyota Highlander Hybrid Ltd (30) Highlander Ltd (25) with taxes $2,953.00-3 without taxes $6,074.62-6 Toyota Prius (55) Corolla LE (34) with taxes $1,493.431 without taxes $4,141.38-4

22 The Results (Continued) Manufacturer Model (mpg) Carbon Monoxide Saved AmountPoints Ford Escape Hybrid (33) Escape (23) 38,88255,787 16,9053 Honda Accord Hybrid (28) Accord (25) 45,825 51,324 5,4991 Honda Civic Hybrid (50) Civic EX (28) 25,66245,825 20,1634 Lexus RX400h (30) Rx330 (25) 42,77051,324 8,5542 Toyota Highlander Hybrid Ltd (30) Highlander Ltd (25) 42,77051,324 8,5542 Toyota Pirus (55) Corolla LE (34) 23,32937,738 14,4093

23 The Results (Continued) Manufacturer Model (mpg) Costs/Savings With Tax Savings Included Without Tax Savings Included Ford Escape Hybrid (33) Escape (23) 93 Honda Accord Hybrid (28) Accord (25) 0 Honda Civic Hybrid (50) Civic EX (28) 86 Lexus RX400h (30) Rx330 (25) 0-4 Toyota Highlander Hybrid Ltd (30) Highlander Ltd (25) 1-4 Toyota Pirus (55) Corolla LE (34) 63

24 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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