The case

The financial pathway to green manifests itself as a dichotomous and mutually-exclusive choice between a hybrid car which entails fossil fuel directly and an all-electric car which doesnt. This exercise frames the decision-making process into a typical mutually-exclusive capital budgeting analysis. We choose Toyota Prius as the hybrid and the Nissan Leaf as the all-electric car.

In August 2015, a Toyota Prius lists at $26,985 as its manufacturer suggested retail price. The corresponding retail price for the Nissan Leaf lists at $29,010.

The Prius has a city-highway combined efficiency of 50 miles per gallon. For the base-case analysis, lets assume a gas price at $3.00 per gallon. This will result in a mileage efficiency of 6 /mile.

The Leaf has an efficiency of 5.4 miles/kWh.[1] For base-case analysis, lets assume electricity supply at a price of 12 /kWh. This will result in a mileage efficiency of 2.2222 /mile.[2]

For simplicity of analysis, lets assume the a driver who needs to drive 12,000 miles a year or 1,000 miles a month for work, school, and other transportation needs. Lets further assume the driver faces an auto loans interest rate of 3% per year or .25% per month.

To do: We first perform a base-case analysis using the data provided or assumed so far.

Q1: Calculate the monthly cash flows for purchasing and operating the Prius for 10 years.

Q2: Calculate the monthly cash flows for purchasing and operating the Leaf for 10 years.