Investing in autonomous construction vehicles Vs. normal construction trucks.
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tech_report_1_sample.pdf
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Technology*Transitions:"! Alternative*Fuel*Vehicles!
CEE!300!
October!14,!2014!
Authors:!!
Victoria!Flys! Dan!Nyx!
Daniela!Panfil! Samantha!Dell’Armi!
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Table&of&Contents&
Executive)Summary)................................................................................................................)1!
Introduction)...........................................................................................................................)2!
Investigative)Method)..............................................................................................................)3!
Results)and)Discussion).................................................................)Error!!Bookmark!not!defined.!
Typical)Conventional)Car)Cash)Flow).....................................................................................)6!
Typical)Natural)Gas)Car)Cash)Flow).......................................................................................)7!
Typical)Electric)Vehicle)Cash)Flow)........................................................................................)9!
Typical)Hybrid)Vehicle)Cash)Flow).......................................................................................)10!
Sensitivity)Analysis)...............................................................................................................)12!
Recommendation).................................................................................................................)14!
References)............................................................................................................................)15!
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1! !
Executive&Summary&
With!increasing!gas!prices!and!growing!environmental!concerns,!many!are!looking!into!
switching!to!alternative!fuel!vehicles.!This!report!investigates!the!financial!impacts!of!the!use!of!
four!alternative!fuel!vehicle!types!for!the!Cactus!Cab!taxi!company!located!in!Phoenix,!Arizona.!
The!alternative!vehicles!investigated!are!a!hybrid!vehicle,!electric!vehicle,!conventional!gas!
vehicle,!and!natural!gas!vehicle.!To!compare!the!vehicle!types,!a!car!from!each!type!was!
selected!as!a!representative.!A!2013!Toyota!Prius!was!used!to!represent!hybrid!cars,!a!2013!
Ford!Fusion!electric!car!to!represent!electric!cars,!a!2014!Nissan!Altima!for!conventional!cars,!
and!Honda!Civic!Natural!gas!for!the!natural!gas!cars.!!
To!compare!the!financial!feasibility!of!the!different!vehicles,!a!cash!flow!diagram!was!
constructed!for!each!vehicle!and!their!net!present!values!were!calculated!and!compared.!Costs!
considered!include!maintenance,!fuel!costs,!MSRP,!and!tax!incentives.!The!net!present!value!of!
the!costs!and!estimated!revenue!was!then!calculated!using!a!discount!rate!of!1%.!The!discount!
rate!was!determined!based!on!interested!rates!for!an!investment!account!in!the!Phoenix!area.!!
Based!on!the!net!present!value!for!each!car,!the!hybrid!vehicle!was!found!to!be!the!best!
financial!option.!Including!estimated!revenue!for!one!driver!in!a!year!and!labor!costs,!the!net!
present!value!of!the!Prius!came!out!to!$492,322.09.!The!electric!vehicle!had!the!lowest!net!
present!value!at!$468,655.64.!The!conventional!and!natural!gas!vehicles!came!out!at!a!similar!
net!present!value!of!$486,414.41!and!$484,480.10,!respectively.!Our!sensitivity!analysis!showed!
that!a!fluctuation!in!gas!prices!and!changes!in!the!discount!rate!could!make!some!small!
difference,!but!it!was!not!enough!to!alter!the!results!except!at!extreme!values.!On!the!other!
hand,!the!sensitivity!analysis!showed!that!if!the!electric!cars!were!to!increase!their!range!to!be!
able!to!go!180!miles!or!more!on!a!charge,!then!the!electric!care!would!be!the!most!profitable.!
However,!current!technology!for!electric!cars!with!a!more!reasonable!MSRP!limits!cars!to!about!
70!miles!per!charge.!For!these!reasons,!switching!to!a!fleet!of!hybrid!vehicles!is!recommended.!!
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2! !
Introduction&
Since!the!late!1800’s!and!early!1900’s,!vehicles!that!use!“alternative!fuel”!have!been!researched!
and!manufactured!with!the!desire!to!create!more!cost^efficient!and!environmentally!friendly!
vehicles.!Alternative!fuel!refers!to!any!fuel!or!power!source!that!is!not!the!conventional!
gasoline!or!diesel.!Three!of!the!many!alternative!fuel!vehicles!include!all^electric!cars,!hybrid!
cars!and!natural!gas!cars.!These!alternative!vehicles!cost!more!to!purchase!than!the!
conventional!car,!but!the!cost!to!fuel!these!cars!is!much!lower!than!the!cost!to!fuel!a!
conventional!car.!Each!of!these!vehicles!have!their!own!advantages!and!disadvantages!that!
include,!but!are!not!limited!to,!greater!gas!mileage,!inexpensive!fuel,!and!reduced!pollution.!!
Electric!cars!are!powered!by!electric!motors!that!have!rechargeable!batteries.!Unlike!gas!
powered!cars,!electric!cars!can!be!charged!anywhere!that!the!driver!has!access!to!a!power!
source!without!being!reliant!on!gas!stations.!Drivers!can!recharge!their!electric!cars!in!their!
homes!overnight!and!have!an!average!of!70!driving!miles!the!next!day!based!on!the!electric!car!
model!that!they!have.!Due!to!the!low!cost!of!electricity,!the!electric!car!can!save!consumers!
money!in!the!long!run;!however,!because!the!car!cannot!travel!long!distances!without!
recharging,!the!range!of!the!electric!car!is!very!limited.!A!3.5!hour!charge!is!required!for!an!
electric!car!to!reach!its!maximum!range!and!there!are!very!few!electric!car!charging!stations!in!
the!country!compared!to!gas!stations.!This!constraint!makes!the!standard!electric!car!a!practical!
choice!for!drivers!who!do!not!drive!very!far!each!day!and!do!not!use!their!personal!car!for!long!
road!trips.!Drivers!who!do!exceed!the!average!mileage!of!an!electric!car!may!have!to!consider!a!
different!type!of!alternative!vehicle.!
Natural!gas!cars!are!fueled!by!fossil!fuels!that!consist!of!a!large!portion!of!methane.!They!act!as!
one!of!the!cleanest!fossil!fueled!vehicles.!These!cars!have!the!mileage!of!a!conventional!car,!but!
the!tank!capacity!is!smaller!than!the!conventional!car’s!capacity.!!There!are!a!number!of!natural!
gas!pumps!in!the!country!and!they!can!easily!be!found!by!drivers!online.!A!major!advantage!of!
the!natural!gas!car,!besides!the!environmental!factor,!is!the!natural!gas!price!per!gallon.!
Approximately!90%!of!the!natural!gas!in!the!United!States!is!domestically!produced!which!
reduces!the!natural!gas!price!to!an!average!of!$2.34!and!a!current!minimum!of!$2.11!in!some!
3! !
locations.!Depending!on!the!number!of!natural!gas!pumps!in!a!driver’s!area,!the!natural!gas!car!
could!be!a!convenient!and!money!saving!option.!Similar!to!the!electric!car,!long!distance!driving!
would!be!dependent!the!driver’s!access!to!a!natural!gas!fuel!station.!Currently!the!natural!gas!
pumps!cannot!be!found!in!every!state!so!the!purchase!of!a!natural!gas!car!would!be!reliant!on!
the!gas!pumps!available!to!the!driver.!!
Hybrid!cars!are!the!combination!of!electric!cars!and!conventional!cars.!The!hybrid!utilizes!both!
an!electric!motor!and!a!gasoline!engine.!The!electric!motor!generates!power!whenever!the!car!
brakes!and!turns!off!the!engine!whenever!the!car!is!stopped.!With!the!electric!motor!assisting!
the!gasoline!engine!the!size!of!the!engine!is!reduced!and!the!mileage!of!the!car!is!increased.!
This!increase!in!mileage!reduces!the!need!to!purchase!gas!as!frequently!which!greatly!reduces!
daily!cost!of!the!vehicle.!Running!on!conventional!gas,!the!hybrid!can!be!driven!anywhere!
without!the!driver!worrying!about!having!limited!refueling!stations.!Though!the!hybrid!driver!
has!to!pay!the!same!gas!price!that!the!conventional!driver!does,!the!hybrid!driver!does!not!have!
to!purchase!as!much!gas!for!the!same!number!of!miles!driven.!
Many!companies!use!fleets!of!cars!to!transport!employees,!clients!and!products!to!and!from!
the!company’s!location.!Increasing!profit!is!one!of!the!main!goals!of!many!companies!and!that!
can!be!achieved!by!reducing!the!travel!expenses.!This!technical!report!will!investigate!the!travel!
expenses!that!Cactus!Cab!taxi!company!would!have!using!electric,!natural!gas,!hybrid!and!
conventional!cars!and!make!a!recommendation!on!which!vehicle!would!maximize!the!
company’s!revenue.!!!
Investigative&Method&
The!factor!that!played!the!biggest!role!in)the!comparison!of!hybrid,!natural!gas,!electric,!and!
conventional!vehicles!was!fuel!cost.!In!order!to!begin!researching!the!fuel!costs!that!would!
accompany!each!vehicle,!a!specific!car!model!was!chosen!for!each!category.!The!chosen!car!
models!are!as!follows:!Toyota!Prius!for!hybrid,!Honda!Civic!for!natural!gas,!Ford!Fusion!for!
electric,!and!Nissan!Altima!for!conventional.!To!determine!the!annual!fuel!cost!for!each!vehicle,!
4! !
the!average!yearly!mileage!for!a!taxi,!price!per!gallon,!and!average!miles!per!gallon!were!used!
in!the!following!sample!calculation:!!
For!the!Nissan!Altima!Conventional!Car:!
!"#.!"#$%&!!"#$%&$!!"#!!!!"#$:!65,700!!"#$%!
!"#$%!!"#!!"##$%:$3.15/!"#!
27!!"#! !"#$ + 38!!"#! ℎ!"ℎ!"# 2 = 32.5!"#!
65,700!"#$% 32.5!"# ∙ $3.15/!"# = $!,!"#.!"/!"#$!
This!same!calculation!was!done!for!the!hybrid!and!natural!gas!vehicles!and!resulted!in!an!
annual!fuel!cost!of!$4,223.57!and!$4,959.29,!respectively.!The!price!of!natural!gas,!$2.34/gal,!
was!used!in!place!of!the!price!for!conventional!gasoline!when!calculating!the!annual!fuel!cost!
for!the!Honda!Civic!natural!gas!vehicle.!The!fuel!costs!for!the!electric!vehicle!are!slightly!
different!since!the!car!functions!entirely!off!of!electricity.!To!calculate!the!annual!cost!of!fuel!for!
the!Ford!Fusion,!the!electricity!used!to!charge!the!vehicle!was!used.!The!cost!to!charge!the!
vehicle!is!approximately!$0.96!per!25!miles!(“All!Electric!Vehicles”!1),!thus!resulting!in!a!cost!of!
$2,522.88!per!year!to!charge!the!vehicle.!This!sample!calculation!can!be!seen!below:!
For!the!Ford!Fusion!Electric!Car:!
!"#.!"#$%&!!"#$%&$!!"#!!!!"#$:!65,700!!"#$%!
!"#$%&'$'%(!!"#$:$0.96!!"#!25!!"#$%!
65,700!"#$% 25!"#$% ∙ $0.96 = $!,!"".!!/!"#$!
After!analyzing!the!fuel!costs!for!each!vehicle,!it!was!seen!that!the!lowest!cost!per!year!in!fuel!
would!be!achieved!by!using!the!electric!vehicle.!Solely!based!on!this!observation,!one!would!
recommend!the!use!of!electric!vehicles!for!the!taxi!company,!but!the!maintenance!costs!as!well!
as!the!MSRP!for!the!electric!vehicle!are!incredibly!costly.!The!electric!vehicle!requires!that!the!
5! !
battery!be!replaced!every!100,000!miles,!which!is!approximately!every!1.5!years!for!a!taxi!which!
drives!65,700!miles!per!year.!Replacing!the!battery!would!result!in!a!cost!of!$15,000!to!the!taxi!
company!every!1.5!years!and!would!be!highly!impractical!for!a!high!mileage!vehicle!such!as!a!
taxi!(Cob!1).!!
Along!with!the!fuel!cost,!other!factors!have!to!be!considered.!These!include!the!maintenance!
costs!of!the!vehicles,!salary!of!the!employees,!and!yearly!revenue.!Each!of!these!factors!will!be!
used!to!calculate!the!net!present!value!in!order!to!determine!which!vehicle!is!best!suited!for!
the!taxi!company!to!use!in!order!to!generate!the!largest!amount!of!yearly!revenue.!
Maintenance!for!each!of!the!vehicles!can!be!found!in!Tables!1^4!below.!Annual!salary!for!a!taxi!
driver!is!approximately!$32,000/year!and!will!be!used!in!calculating!the!Net!Present!Value!of!
each!vehicle!(“Taxi!Driver!Salaries”!1).!The!yearly!revenue!for!the!taxi!company!can!be!
calculated!using!the!following!formulas!below:!
Yearly!Revenue:!
!"#$!!"#!!"#$:$2.14/!"#$!
!"#.!"#$!"!!"#$%&!!"#!!!!"#$:!65,700!!"#$%!
65,700!"#$% ∙ $2.14/!"#$ = $!"",!"#/!")
The!price!that!a!typical!taxi!company!charges!per!mile!of!driving!is!about!$2.14/mile.!!
After!taking!all!of!these!factors!into!consideration!the!net!present!value!of!each!vehicle!was!
calculated!so!as!to!arrive!at!a!conclusion!of!which!vehicle!would!be!the!best!option!for!the!taxi!
company!to!use!in!order!to!maximize!their!yearly!revenue.!Net!present!value!can!be!expressed!
through!the!following!equation:!
!"# = !!
(1 + !)! − !! !
!!! !
where!!!!is!the!net!cash!inflow!during!the!period,!!!is!the!discount!rate,!!!is!the!time,!and!!!!is! the!initial!investment.!Net!present!value!can!also!be!calculated!in!Excel!using!the!NPV!formula.!!
6! !
Results&and&Discussion&
There!are!several!factors!to!take!into!consideration!when!trying!to!compare!various!vehicles.!
They!are!listed!below:!
1. Average!cost!of!the!base!model!for!a!specific!type!of!car!
2. Possible!tax!rebates!for!purchasing!cars!with!certain!fuel!types!
3. Fuel!costs!(gas!or!electricity)!
4. Maintenance!costs!
In!the!specific!case!of!the!taxi!cab!company,!one!must!also!take!into!account!the!salaries!of!the!
drivers,!as!well!as!the!revenue!they!are!making!from!the!rate!mileage!they!charge.!Please!note!
that!insurance!costs!can!be!considered!the!same!across!all!four!types!of!vehicles,!and!therefore!
was!left!out!of!the!calculation.!The!final!decision!was!based!on!the!net!present!value!for!each!
fuel!type!compared!with!the!conventional!car.!
Typical!Conventional!Car!Cash!Flow!
The!cost!analysis!was!performed!on!the!conventional!car!using!the!factors!listed!above.!The!
total!cost!for!each!year!was!added!into!a!“5!Year!Total”.!The!net!present!value!of!a!conventional!
car!over!five!years,!with!a!1.0%!discount!rate,!is!summarized!below.!
Table)1:)Cash)Flow)of)Conventional)Gas)Powered)Vehicle)
! Year!0! Year!1! Year!2! Year!3! Year!4! Year!5!
Car! ^22000! 0! 0! 0! 0! 0! Tax!Rebate! 1500! 0! 0! 0! 0! 0! Fuel! 0! ^6367.85! ^6367.85! ^6367.85! ^6367.85! ^6367.85! Maintenance! 0! ^725.4! ^725.4! ^725.4! ^725.4! ^725.4! Salary! 0! ($32,000.00)! ($32,000.00)! ($32,000.00)! ($32,000.00)! ($32,000.00)! Revenue! 0! $144,540.00!! $144,540.00!! $144,540.00!! $144,540.00!! $144,540.00!! Total! ^20500! 105446.75! 105446.75! 105446.75! 105446.75! 105446.75! !
7! !
Table)2:)Summary)of)Financial)Results)Conventional)Gas)Powered)Vehicle)
5!Year!Total! 506,733.75! Discount!Rate! 1.00%! NPV! $486,414.41!!
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From!this!analysis,!one!can!see!that!the!net!present!value!of!the!profits!that!the!taxi!company!
would!make!over!a!five!year!period!for!conventional!cars!is!$486,414.41.!This!car!has!a!constant!
upfront!cost!and!constant!profits!over!the!years.!It!is!a!reliable!vehicle!in!the!sense!that!the!
company!would!easily!be!able!to!predict!their!profits!for!any!given!year;!however,!it!is!not!the!
cheapest!option!for!them.!The!natural!gas!car!will!be!studied!next.!
Typical!Natural!Gas!Car!Cash!Flow!
The!same!cost!analysis!was!performed!on!the!natural!gas!vehicle!as!was!done!for!the!
conventional!car.!The!results!of!the!cash!flow!are!shown!below.!
Table)3:)Cash)Flow)of)Natural)Gas)Powered)Vehicle)
! Year!0! Year!1! Year!2! Year!3! Year!4! Year!5!
Natural!Gas!Car! ^29,290! 0! 0! 0! 0! 0! Tax!Rebate! 0! 0! 0! 0! 0! 0! Fuel! 0! 4959.29! 4959.29! 4959.29! 4959.29! 4959.29!
^20500!
105446.75!105446.75!105446.75!105446.75!105446.75!
^40000!
^20000!
0!
20000!
40000!
60000!
80000!
100000!
120000!
Year!0! Year!1! Year!2! Year!3! Year!4! Year!5!
Co st )p er )Y ea r)
Years))
Cash)Flow)Diagram)for) ConvenSonal)Cars)
8! !
Maintenance! 0! ^725.4! ^725.4! ^725.4! ^725.4! ^725.4! Revenue!! 0! 144,540! 144,540! 144,540! 144,540! 144,540! Taxi!Driver!Salary! 0! ^32,000! ^32,000! ^32,000! ^32,000! ^32,000! Total! ^29,290! 106,855! 106,855! 106,855! 106,855! 106,855!
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Table)4:)Summary)of)Financial)Results)for)Natural)Gas)Powered)Vehicle)
5!year!total! $504,987.00!! Discount!Rate! 1.00%! Net!Present!Value!! $484,480.10!!
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Similar!to!the!conventional!gas!vehicle,!the!natural!gas!car!provides!a!constant!yearly!profit,!
although!it!is!not!the!maximized!profit!that!the!taxi!company!could!receive.!After!applied!a!
1.0%!discount!rate!to!the!5!year!total!profits,!the!resulting!profit!is!$484,480.10.!As!is!evident!
from!the!comparison,!the!natural!gas!car!does!not!make!as!great!of!a!profit!for!the!taxi!
company!as!their!current!choice!of!conventional!cars!does,!despite!the!fact!that!the!natural!gas!
is!a!better!choice!for!the!environment.!The!next!car!to!be!analyzed!is!the!all^electric!vehicle.!
^40!
^20!
0!
20!
40!
60!
80!
100!
120!
Year!0! Year!1! Year!2! Year!3! Year!4! Year!5!
Pr ofi
t)P er )y ea r) in )T ho
us an
ds )
Years)
Natural)Gas)Car)
9! !
!
!
!
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Typical!Electric!Vehicle!Cash!Flow!
The!cash!flow!diagram!for!the!electric!vehicle!is!shown!below.!
Table)5:)Cash)Flow)of)Electric)Vehicle)
! Year!0! Year!1! Year!2! Year!3! Year!4! Year!5!
Car! ^70400! 0! 0! 0! 0! 0! Tax!rebate! 15000! 0! 0! 0! 0! 0! Fuel! 0! ^2522.88! ^2522.88! ^2522.88! ^2522.88! ^2522.88! Maintenance! 0! ^1456! ^31456! ^1456! ^31456! ^1456! salary! 0! ^32000! ^32000! ^32000! ^32000! ^32000! rate!revenue! 0! 144540! 144540! 144540! 144540! 144540! Total! ^55400! 108561.12! 78561.12! 108561.12! 78561.12! 108561.1! !
Table)6:)Summary)of)Financial)Results)for)Electric)Vehicle)
5!year!Total! $482,805.60! Discount!Rate! 1.00%!
Net!Present!Value! $468,655.64! !
!
10! !
!
The!electric!car!provides!a!unique!viewpoint!on!the!scenario.!It!is!important!to!note!the!range!
of!the!electric!vehicle.!The!average!taxi!drives!180!miles!per!day.!Therefore,!the!company!would!
need!a!car!that!is!capable!of!travelling!that!distance.!Due!to!the!fact!that!electric!vehicles!run!
without!any!gas,!they!are!solely!reliant!on!charging!the!battery!in!order!to!run.!The!average!
electric!car!has!a!range!of!76!miles,!which!means!that!the!taxi!company!would!need!two!electric!
cars!to!be!able!to!travel!the!average!180!miles.!The!charging!time!for!an!electric!vehicle,!
approximately!3.5!hours,!is!not!fast!enough!to!allow!one!electric!taxi!car!to!drive!the!180!miles!
per!day.!The!cost!of!fuel!for!the!electric!car!was!calculated!based!on!the!electricity!it!uses!to!
charge,!which!is!approximately!$0.96!per!25!miles!of!driving.!Therefore,!the!cash!flow!diagram!
factors!in!the!price!of!two!electric!cars.!The!maintenance!costs!for!electric!vehicles!are!much!
more!expensive,!as!the!batteries!must!be!replaced!every!100,000!miles,!or!approximately!every!
1.5!years.!The!cost!of!a!new!battery!is!$15,000,!which!makes!electric!vehicles!impractical!for!a!
high!mileage!vehicle.!The!net!present!value!of!the!profits!by!the!company!are!$468,655.64!
using!a!discount!rate!of!1.0%.!
Typical!Hybrid!Vehicle!Cash!Flow!
The!cash!flow!diagram!and!cost!analysis!for!the!hybrid!vehicle!are!shown!below.!
^80000!
^60000!
^40000!
^20000!
0!
20000!
40000!
60000!
80000!
100000!
120000! Year!1! Year!2! Year!3! Year!4! Year!5!
Pr ic e) ($ ))
Electric)Car)Cash)Flow)Diagram)
11! !
Table)7:)Cash)Flow)of)Hybrid)Vehicle)
! Year!0! Year!1! Year!2! Year!3! Year!4! Year!5!
Car! (25,000.00)! 0! 0! 0! 0! 0! Tax!rebate! 0! 0! 0! 0! 0! 0! Fuel! 0! !(4,223.57)! !!(4,223.57)! !(4,223.57)! !(4,223.57)! !(4,223.57)! Maintenance! 0! !(96.00)! !(267.00)! !(2,402.00)! !(531.00)! !!(276.00)! salary! 0! !(32,000.00)! !(32,000.00)! !(32,000.00)! !(32,000.00)! (32,000.00)! rate!revenue! 0! 144,540.00!! 144,540.00!! 144,540.00!! 144,540.00!! !144,540.00!!
Total! !!!!!!!!!!!!!!!!!! (25,000.00)!
!!!!!!!!!!!!!!!!!!!!!!!!!!! 108,220.43!!
!!!!!!!!!!!! 108,049.43!!
!!!!!!!! 105,914.43!!
!!!!!!!! 107,785.43!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 108,040.43!!
!
Table)8:)Summary)of)Financial)Results)for)Hybrid)Vehicle)
5!year!total! $513,010.14!! Discount!rate! 1.00%! Net!Present!Value! $492,322.09!!
!
!
The!hybrid!car!proves!to!be!the!best!option!for!the!taxi!cab!company.!The!year!to!year!profits!
for!the!hybrid!car!vary!slightly!due!to!maintenance.!The!cost!of!the!base!model!for!the!average!
hybrid!car!is!reasonably!priced,!and!the!fuel!costs!are!low,!as!the!hybrid!uses!brake!energy!to!
power!the!car!in!addition!to!the!gas.!The!final!profit!using!net!present!value!is!$492,322.09.!This!
^25,000!
108,220! 108,049! 105,914! 107,785! 108,040!
^40,000! ^20,000!
0! 20,000! 40,000! 60,000! 80,000! 100,000! 120,000!
0! 1! 2! 3! 4! 5! Year)
Cash)Flow)Diagram)for)Hybrid)Cars)
12! !
profit!is!the!highest!of!the!four!fuel!types,!and!would!be!the!best!financial!option!for!the!taxi!
company.!!
The!calculated!values!are!exhibited!below!in!Table!9.!
Table)9:)Net)Present)Value)for)Each)Vehicle)Type)
Type!of!Vehicle! Net!Present!Value!
Hybrid:!Toyota!Prius! $492,322.09!
Conventional:!Nissan!Altima! $486,414.41!
Electric:!Ford!Fusion! $468,655.64!
Natural!Gas:!Honda!Civic! $484,480.10!
!
From!Table!9,!it!is!clear!that!the!Toyota!Prius!hybrid!vehicle!yields!a!higher!net!present!value!
than!the!others!and!results!in!a!better!option!for!the!taxi!company.!Hybrid!vehicles!have!an!
overall!lower!fuel!cost!than!the!conventional!and!natural!gas!vehicles!and!the!initial!cost!of!
purchasing!the!vehicle!is!reasonably!priced.!For!these!reasons!the!hybrid!vehicle!is!the!best!
financial!option!for!the!company!and!will!result!in!a!higher!yearly!revenue!in!comparison!to!the!
conventional,!electric,!and!natural!gas!vehicles!studied!above.!
Sensitivity&Analysis&
There!are!several!factors!that!can!affect!the!result!of!the!analysis!and!comparison.!First!of!all,!
the!price!of!gas!is!constantly!changing.!If!the!gas!prices!were!to!decrease!significantly!in!the!
next!five!years,!then!the!conventional!cars!may!become!a!financially!stronger!option!for!a!high!
mileage!vehicle.!However,!a!sensitivity!analysis!showed!that!even!if!the!gas!price!reduced!to!
$2.00,!the!hybrid!vehicle!would!still!be!the!most!financially!preferred!option!(Table!10).!This!
trend!remains!the!same!from!discount!rates!from!0.02%!to!25%!for!gas!prices!of!$2!and!$3.15.!
It!only!changes!at!a!gas!price!of!$4!when!the!discount!rate!surpasses!%15,!in!which!case!the!
conventional!vehicle!is!slighter!more!profitable!than!the!hybrid,!but!the!electric!vehicle!is!more!
profitable!at!this!point!that!the!conventional!and!hybrid!vehicles.!!!
13! !
Table)10:)Sensitivity)Analysis)of)Changing)Gas)Prices)On)Net)Percent)Value)
Gas!Price! Hybrid! Electric! Conventional! Natural!gas! $2.00! $499,700.00!! $468,700.00!! $497,600.00!! $484,500.00!! $3.15! $492,300.00!! $468,700.00!! $486,400.00!! $484,500.00!! $4.00! $486,800.00!! $468,700.00!! $478,200.00!! $484,500.00!!
!
For!the!electric!vehicle,!the!price!of!electricity!can!vary,!and!therefore!could!affect!the!price!of!
the!fuel.!Also,!technological!upgrades,!such!as!faster!charging!times!for!electric!cars,!could!
allow!one!car!to!have!the!capability!of!driving!the!180!miles!per!day,!which!could!then!make!the!
most!profitable!option.!In!fact,!if!one!electric!vehicle!had!the!capability!to!drive!the!full!180!
miles!per!day,!then!the!electric!vehicle!would!be!the!most!profitable!in!this!study,!as!shown!in!
Table!11!below.!!
Table)11:)Net)Present)Value)Of)Alternative)Vehicle)Types)If)One)Electric)Car)Could)Go)180)Miles/Day)Or)More)
Hybrid! Electric! Conventional! Natural!gas! $499,700.00!! $501,300.00! $468,700.00!! $486,400.00!!
!
Another!factor!is!the!discount!rate.!If!the!discount!rate!were!to!increase!or!decrease,!then!the!
most!profitable!option!of!the!four!types!of!cars!could!change.!As!can!be!seen!in!Table!12!below,!
if!the!discount!rate!used!increases!to!above!5%,!then!the!most!profitable!car,!based!on!net!
present!value,!changes!to!the!electric!car.!For!discount!rates!below!5%,!the!hybrid!car!is!the!
most!profitable.!However,!current!interests!rates!found!for!Phoenix!ranged!from!0.01%!to!
1.05%,!so!this!report!bases!the!recommendation!based!on!a!discount!rate!of!this!amount.!!
Table)12:)NVP)Comparison)for)Alternative)Fuel)Vehicles)at)Various)Discount)Rates.)Car)type)with)best)NPV)is) highlighted)in)blue.)
Discount!Rate! Hybrid!Car! Electric!Car! Conventional!Car! Natural!Gas!Car! 0.02%! $512,600.00!! $482,500.00!! $506,300.00!! $504,600.00!! 0.50%! $502,500.00!! $475,600.00!! $496,400.00!! $494,600.00!! 1.00%! $492,300.00!! $468,700.00!! $486,400.00!! $484,500.00!! 1.50%! $482,400.00!! $461,800.00!! $476,700.00!! $474,600.00!! 5.00%! $419,900.00!! $418,100.00!! $415,300.00!! $412,700.00!! 6.00%! $404,100.00!! $406,800.00!! $399,700.00!! $397,000.00!! 10.00%! $348,100.00!! $366,200.00!! $344,800.00!! $341,600.00!!
14! !
15.00%! $292,000.00!! $324,100.00!! $289,500.00!! $286,000.00!! !
Recommendation&
The!hybrid!car!was!found!to!be!the!best!option!for!the!taxi!company.!Though!it!is!not!the!
cheapest!initial!purchase!the!net!present!value!of!the!hybrid!car!is!the!greatest!of!the!four!cars.!
Running!on!less!gasoline!than!conventional!cars,!the!hybrid!is!more!environmentally!friendly!
than!the!conventional!car,!yet!it!can!travel!as!far,!if!not!farther!than,!the!conventional!car!with!
the!same!amount!of!fuel.!The!electric!car!was!not!a!feasible!choice!because!two!cars!had!to!be!
purchased!in!order!to!travel!the!same!distance!as!the!other!three!cars.!
!
! !
15! !
References&
"About!5^Year!Cost!To!Own!^!Kelley!Blue!Book."!Kbb.com.!Web.!15!Oct.!2014.!
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Department!of!Energy,!13!Oct.!2014.!Web.!13!Oct.!2014.!
cars.com.!2013!Toyota!Prius.!3!10!2014!
<http://www.cars.com/toyota/prius/2013/costofownership/>.!
"CNG!vs.!Gasoline."!CNG/Vehicles.!Web.!15!Oct.!2014.!
Cob,!Jeff.!"How!Long!Will!An!Electric!Car's!Battery!Last?"!Hybrid/Cars:/Auto/Alternatives/for/the/
21st/Century.!N.p.,!30!Apr.!2014.!Web.!13!Oct.!2014.!
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2014.!
"Electric!Car!Costs!vs!Gasoline!Cars!vs!Hybrids."!CarsDirect.!Web.!15!Oct.!2014.!
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"Fuel!Economy."!Fuel/Economy.!U.S.!Department!of!Energy,!n.d.!Web.!14!Oct.!2014.&
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"The!Pros!and!Cons!of!Gasoline!Cars."!)/Torque/News.!Web.!15!Oct.!2014.!
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"True Cost to Own® (TCO®)." Calculator on Edmunds.com. Web. 15 Oct. 2014.!
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16! !
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