Cost Benefit Analysis

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Cost Benefit Analysis Hybrid Cars

• Presented by
• Mukesh Kakkar
• Jeff Graebner
• James Lepp

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Agenda

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

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Cost Benefits

• Costs are value of the resources that must be
  used to develop, implement, and operate the
  program being analyzed

• Benefits are primary positive outcomes or
  consequences

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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.

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CBA Drill-down tree
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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
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Hybrid Vehicles
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Functioning
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Opinions- facts or fiction
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(No Transcript)
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Gas Prices
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Regressions

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

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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

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Statistics
Audit Trail -- Coefficient Table (Multiple Regression Selected) Audit Trail -- Coefficient Table (Multiple Regression Selected) Audit Trail -- Coefficient Table (Multiple Regression Selected) Audit Trail -- Coefficient Table (Multiple Regression Selected)  
Series Included Standard
Description in Model Coefficient Error T-test
Gas Price Dependent -13.76 1.63 -8.44
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
Q1 Yes -0.01 0.04 -0.27
Q2 Yes 0.11 0.04 3.00
Q3 Yes 0.04 0.04 1.00
Accuracy Measures Accuracy Measures   Value
AIC -73.65
BIC -72.47
Mean Absolute Percentage Error (MAPE) Mean Absolute Percentage Error (MAPE) Mean Absolute Percentage Error (MAPE) 2.38
R-Square 97.78
Adjusted R-Square Adjusted R-Square 96.60
Overall
F-test
82.68
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Forecast
Year Gas Price
2006 2.73
2007 2.91
2008 3.19
2009 3.47
2010 3.75
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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
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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
• Take a decentralized approach to environmental
  pollution
• Lower Emissions
• Less Carbon Monoxide adding to Global Warming
• Self-Powering Engines
• No hassle in finding a plug
• Special Car-Pool Lanes
• No matter how many people are in the car

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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

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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) 1,568 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 1,163
with federal tax credits     2,156
w/o federal tax credits     56
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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
Total Carbon Monoxide Released Total Carbon Monoxide Released Total Carbon Monoxide Released 25,662 45,825
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The Results
Manufacturer Model (mpg) Model (mpg) Costs/Savings Costs/Savings Points
Ford Escape Hybrid (33) Escape (23) with taxes 3,871.42 4
Ford Escape Hybrid (33) Escape (23) without taxes 2,450.58 -2
Honda Accord Hybrid (28) Accord (25) with taxes 3,251.84 -3
Honda Accord Hybrid (28) Accord (25) without taxes 3,901.84 -4
Honda Civic Hybrid (50) Civic EX (28) with taxes 2,156.36 2
Honda Civic Hybrid (50) Civic EX (28) without taxes 56.36 0
Lexus RX400h (30) Rx330 (25) with taxes 4,296.78 -4
Lexus RX400h (30) Rx330 (25) without taxes 6,496.78 -6
Toyota Highlander Hybrid Ltd (30) Highlander Ltd (25) with taxes 2,953.00 -3
Toyota Highlander Hybrid Ltd (30) Highlander Ltd (25) without taxes 6,074.62 -6
Toyota Prius (55) Corolla LE (34) with taxes 1,493.43 1
Toyota Prius (55) Corolla LE (34) without taxes 4,141.38 -4
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The Results (Continued)
Manufacturer Model (mpg) Model (mpg) Carbon Monoxide Saved Carbon Monoxide Saved
Manufacturer Model (mpg) Model (mpg) Amount Points
Ford Escape Hybrid (33) Escape (23)  
Ford 38,882 55,787 16,905 3
Honda Accord Hybrid (28) Accord (25)  
Honda 45,825 51,324 5,499 1
Honda Civic Hybrid (50) Civic EX (28)  
Honda 25,662 45,825 20,163 4
Lexus RX400h (30) Rx330 (25)  
Lexus 42,770 51,324 8,554 2
Toyota Highlander Hybrid Ltd (30) Highlander Ltd (25)  
Toyota 42,770 51,324 8,554 2
Toyota Pirus (55) Corolla LE (34)  
Toyota 23,329 37,738 14,409 3
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The Results (Continued)
Manufacturer Model (mpg) Model (mpg) Costs/Savings Costs/Savings
Manufacturer Model (mpg) Model (mpg) With Tax Savings Included Without Tax Savings Included
Ford Escape Hybrid (33) Escape (23) 9 3
Honda Accord Hybrid (28) Accord (25) 0 -1
Honda Civic Hybrid (50) Civic EX (28) 8 6
Lexus RX400h (30) Rx330 (25) 0 -4
Toyota Highlander Hybrid Ltd (30) Highlander Ltd (25) 1 -4
Toyota Pirus (55) Corolla LE (34) 6 3
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Questions
"An unsophisticated forecaster uses statistics as
a drunken man uses lamp-posts - for support
rather than for illumination."Andrew Lang