You have been hired as a Buyer in a large transportation services organization and the first assignment given to you by the VP OSC&L was worded as follows: We must buy 20 small SUVs for a certain type of specialized transportation service in the Lower Mainland. The service designers have chosen the Hyundai Kona as the vehicle type that responds to their requirements, and they are indifferent between the ICE and the EV models. However, if it is the ICE, they pointed to the Luxury FWD trim, while in the case of a Kona EV, they would need the Ultimate trim. We will make the decision based solely on the TCO. It is your responsibility to develop a comprehensive and accurate TCO analysis (in terms of NPV) and provide your conclusions and the underlying work. You need to work with a discount rate of 8% per year - that is what our CFO uses currently. You started by gathering operating conditions and cost information, as follows: These vehicles will be driven 100,000 km on average per year and will be replaced at the end of their 30 year of operation. For the ICE vehicle, an overhaul of the engine would have to be scheduled in the middle on the second year (the battery of the Kona EV is covered by the manufacturer's warranty for the entire period of exploitation - 3 years and 300,000 km). The tire consumption is expected to be identical between the two types of motorization. Other costs are included in the table below. A few things that you still need to clarify are: 1. Cost of the fuel consumed by the ICE vehicle and, respectively, the cost of recharging the EV battery. You will have to conduct your own research and determine the expected fuel consumption - and the total cost - for the ICE vehicle, and the cost of the recharging of the EV battery over the period of 3 years of use of the Kona EV. Any "fuel consumption guide" would be acceptable, but it must be identified as the source of your information. For the price of gasoline, you may use $1.25 per litre. For the cost of recharging the Kona EV, please see the notes(*) below: 2. The salvage value or, exactly the opposite, the cost of disposal of the battery of the EV vehicle at the end of the 3 years of operation. The battery of the Kona EV will have less than 80% residual capacity at the end of the 3rd year. Currently, specialized facilities may either recycle materials from these batteries or dispose of them. Please conduct your own research and predict a value (salvage, or cost of disposal), in accordance with your own analysis which must be briefly explained with citation of sources. FOR THE FIELDS HIGHLIGHTED IN YELLOW BELOW, PLEASE USE THE DATA IN THE INDIVIDUALIZED TABLE PROVIDED TO YOU BY T EMAIL. IT IS YOUR RESPONSIBILITY TO RESEARCH, ESTIMATE, OR CALCULATE ANY OTHER DATA THAT MIGHT BE NECESSARY TO RESPOND TO THE ASSIGNED TASK. Date cost recorded paid Kona ICE kona EV 100.000 100.000 X Technical & cost-related Information Annual distance driven (km) Gasoline or Electrical Energy consumed Cost of gasoline or electricity Insurance per year Cost of maintenance & repairs (1" year) Planned overhaul first 4 years Purchase Price, including taxes and fees Additional Warranty Insurance Cost Salvage value at the end of the 34 year Disposal cost at the end of the 3 $1.25 per SEX SEX Beginning of each year of operation S***** S Paid at the end of the year 15% increase per year after year Middle year 2 None End of 2 year of operation Sxxxx June 30, 2020 $3,750 $1.50 June 30, 2020 For ICE this specific value can be $2,950 agreed with the dealer at the time of purchase * To minimize the cost of charging the Kona EV battery, you followed the consensus of several consultants and decided to install 240V, Level-2 chargers at your organization's premises, at a total cost of $32,000. Using these recharging stations, for a total distance of 100,000 km driven per year, the cost of electricity for charging one Kona EV would be $2,400 per year. The vehicles must start operating on July 1, 2020. The "years" mentioned above start on July 1 (2020, 2021, and 2022). The purchase cost for the vehicles and all relevant costs for having them ready to commence operating are paid on June 30, 2020. All other costs are considered incurred paid/recorded at the end of the corresponding year. All costs (when incurred paid recorded) are considered cash proceeds, which means that the cost of ownership is expressed as cash flows for each year of operation. You must conduct an NPV analysis (discount rate: 8% per annum) of the TCO for each of the two vehicle models and, on this basis, recommend which model to be acquired. Submit to the Moodle assignment available for this purpose one Excel workbook (file name: Midterm-LastName-FirstName), with a single worksheet containing all your calculations as well as all your comments (as you deem necessary) and the final recommendation - which must be clearly formulated and i il ciu de considerations that you may have applied to your analysis and might be necessary for the reader to fully Date cost recorded/paid Kona ICE 100,000 ? $1.25 per 1. $3802 $8605 Technical & cost-related Information Annual distance driven (km) Gasoline or Electrical Energy consumed Cost of gasoline or electricity Insurance per year Cost of maintenance & repairs (1" year) Planned overhaul first 4 years Purchase Price, including taxes and fees Additional Warranty Insurance Cost Salvage value at the end of the 3'year Kona EV 100,000 ? ? $4987 $3381 None Middle year 2 $33735 $3,750 $2,950 (*) (*) Beginning of each year of operation Paid at the end of the year. 15% increase per year after year 1 End of 2nd year of operation June 30, 2020 June 30, 2020 For ICE, this specific value can be agreed with the dealer at the time of purchase $56164 $1,580 ? Disposal cost at the end of the 34 year 0 ? You have been hired as a Buyer in a large transportation services organization and the first assignment given to you by the VP OSC&L was worded as follows: We must buy 20 small SUVs for a certain type of specialized transportation service in the Lower Mainland. The service designers have chosen the Hyundai Kona as the vehicle type that responds to their requirements, and they are indifferent between the ICE and the EV models. However, if it is the ICE, they pointed to the Luxury FWD trim, while in the case of a Kona EV, they would need the Ultimate trim. We will make the decision based solely on the TCO. It is your responsibility to develop a comprehensive and accurate TCO analysis (in terms of NPV) and provide your conclusions and the underlying work. You need to work with a discount rate of 8% per year - that is what our CFO uses currently. You started by gathering operating conditions and cost information, as follows: These vehicles will be driven 100,000 km on average per year and will be replaced at the end of their 30 year of operation. For the ICE vehicle, an overhaul of the engine would have to be scheduled in the middle on the second year (the battery of the Kona EV is covered by the manufacturer's warranty for the entire period of exploitation - 3 years and 300,000 km). The tire consumption is expected to be identical between the two types of motorization. Other costs are included in the table below. A few things that you still need to clarify are: 1. Cost of the fuel consumed by the ICE vehicle and, respectively, the cost of recharging the EV battery. You will have to conduct your own research and determine the expected fuel consumption - and the total cost - for the ICE vehicle, and the cost of the recharging of the EV battery over the period of 3 years of use of the Kona EV. Any "fuel consumption guide" would be acceptable, but it must be identified as the source of your information. For the price of gasoline, you may use $1.25 per litre. For the cost of recharging the Kona EV, please see the notes(*) below: 2. The salvage value or, exactly the opposite, the cost of disposal of the battery of the EV vehicle at the end of the 3 years of operation. The battery of the Kona EV will have less than 80% residual capacity at the end of the 3rd year. Currently, specialized facilities may either recycle materials from these batteries or dispose of them. Please conduct your own research and predict a value (salvage, or cost of disposal), in accordance with your own analysis which must be briefly explained with citation of sources. FOR THE FIELDS HIGHLIGHTED IN YELLOW BELOW, PLEASE USE THE DATA IN THE INDIVIDUALIZED TABLE PROVIDED TO YOU BY T EMAIL. IT IS YOUR RESPONSIBILITY TO RESEARCH, ESTIMATE, OR CALCULATE ANY OTHER DATA THAT MIGHT BE NECESSARY TO RESPOND TO THE ASSIGNED TASK. Date cost recorded paid Kona ICE kona EV 100.000 100.000 X Technical & cost-related Information Annual distance driven (km) Gasoline or Electrical Energy consumed Cost of gasoline or electricity Insurance per year Cost of maintenance & repairs (1" year) Planned overhaul first 4 years Purchase Price, including taxes and fees Additional Warranty Insurance Cost Salvage value at the end of the 34 year Disposal cost at the end of the 3 $1.25 per SEX SEX Beginning of each year of operation S***** S Paid at the end of the year 15% increase per year after year Middle year 2 None End of 2 year of operation Sxxxx June 30, 2020 $3,750 $1.50 June 30, 2020 For ICE this specific value can be $2,950 agreed with the dealer at the time of purchase * To minimize the cost of charging the Kona EV battery, you followed the consensus of several consultants and decided to install 240V, Level-2 chargers at your organization's premises, at a total cost of $32,000. Using these recharging stations, for a total distance of 100,000 km driven per year, the cost of electricity for charging one Kona EV would be $2,400 per year. The vehicles must start operating on July 1, 2020. The "years" mentioned above start on July 1 (2020, 2021, and 2022). The purchase cost for the vehicles and all relevant costs for having them ready to commence operating are paid on June 30, 2020. All other costs are considered incurred paid/recorded at the end of the corresponding year. All costs (when incurred paid recorded) are considered cash proceeds, which means that the cost of ownership is expressed as cash flows for each year of operation. You must conduct an NPV analysis (discount rate: 8% per annum) of the TCO for each of the two vehicle models and, on this basis, recommend which model to be acquired. Submit to the Moodle assignment available for this purpose one Excel workbook (file name: Midterm-LastName-FirstName), with a single worksheet containing all your calculations as well as all your comments (as you deem necessary) and the final recommendation - which must be clearly formulated and i il ciu de considerations that you may have applied to your analysis and might be necessary for the reader to fully Date cost recorded/paid Kona ICE 100,000 ? $1.25 per 1. $3802 $8605 Technical & cost-related Information Annual distance driven (km) Gasoline or Electrical Energy consumed Cost of gasoline or electricity Insurance per year Cost of maintenance & repairs (1" year) Planned overhaul first 4 years Purchase Price, including taxes and fees Additional Warranty Insurance Cost Salvage value at the end of the 3'year Kona EV 100,000 ? ? $4987 $3381 None Middle year 2 $33735 $3,750 $2,950 (*) (*) Beginning of each year of operation Paid at the end of the year. 15% increase per year after year 1 End of 2nd year of operation June 30, 2020 June 30, 2020 For ICE, this specific value can be agreed with the dealer at the time of purchase $56164 $1,580 ? Disposal cost at the end of the 34 year 0