80.2K

Verified Solution

Link Copied!

Next, we perform 2-variable sensitivity analyses over ranges of plausible values for the two variables by calculating the discount payback which is simply the number of years it entails to breakeven the extra $2,025 upfront payment for the all-electric Nissan Leaf. For the Prius, we choose gas price as the variable for a range of 2.00 $/gallon to 6.00 $/gallon over a 50- increment. For the Leaf, we choose three variables, namely the interest rate from 0% to 6% per year, electric supply rate from 8 /kWh to 16 /kWh, and tax credit for buying the electric car from $0 (the base-case analysis above) to $2,000 at $500 increment. Beware of the #NUM! output when applying the Excels Data, What-if Analysis, Data Table mode. They are not spurious output but do have their own significant economic interpretation. Those who need help with the Data Table function in Excel, please refer to the Appendix where a similar numerical example was presented as an illustration.

Q5: What does the output #NUM! mean financially in Table 1 if you change the price spread from $2,025 to $4,000? Use numbers to justify your answer. Now, change the price spread back to $2,025 before answer the following questions.

Q6: From Table 1, make two ceteris paribus statements on the discounted payback on each variable. Then, make another combined statement on discounted paybacks trend based on both variables. (20%)

Q7: From Table 2, make two ceteris paribus statements on the discounted payback on each variable. Then, make another combined statement on discounted paybacks trend based on both variables. (20%)

Q8: From Table 3, make two ceteris paribus statements on the discounted payback on each variable. Then, make another combined statement on discounted paybacks trend based on both variables. (20%)

Answer & Explanation Solved by verified expert

See Answer