Question

Cost Benefit Analysis over 10 years

Do a cost benefit analysis to decide wheteher to switch from a gas car to an electric car.

HINT: Make cash flow table for 10 years reflecting the total savings of switching from gas car to electric car

The government is offering an incentive of $11,000 for trading your gas car in and buying an electric vehicle

Assume that cost of gas will increase by 5% each year

You must include NPV and IRR for both comparisons in excel AND make a reccommendation

Interest rate = 4.50%

(you are free to make any other assumtions or rates you make, but be sure to clearly list them)

Electric Vehicle			Gas Car
Cost of Electric Car	€ 15,000
Electricity cost per kWh	€ 0.125		cost of fuel per gallon	€ 4.16
EV electricity consumption - kWh per mile	.483kWh/m		mpg	28.6
eFuel Cost / mile	€ 0.06		Gas Cost / mile	€ 0.15
# of miles driven per year	8,500		# of miles driven per year	8,500
Total Fuel Costs / yr	€ 513.19		Total Fuel Costs / yr	€ 1,236.36
Maintenance Costs	€ 485.00		Maintenance Costs	€ 1,500.00
Total Cost / yr	€ 998.19		Total Cost / yr / car	€ 2,736.36

Answer 1

TIME (in Years) -->	0	1	2	3	4	5	6	7	8	9	10
Upfront Purchase Cost Differential	-15,000
Govt Incentive	11,000
EV Costs Year		-998	-998	-998	-998	-998	-998	-998	-998	-998	-998
GV Maintenance Costs		-1,500	-1,500	-1,500	-1,500	-1,500	-1,500	-1,500	-1,500	-1,500	-1,500
GV Fuel Costs		-1,236	-1,298	-1,363	-1,431	-1,503	-1,578	-1,657	-1,740	-1,827	-1,918
Cost Savings		1,738	1,800	1,865	1,933	2,005	2,080	2,159	2,241	2,328	2,420
Final Cashflows	-4,000	1,738	1,800	1,865	1,933	2,005	2,080	2,159	2,241	2,328	2,420
IRR =	46%
NPV =	11,540