Civil Engineering Reference
In-Depth Information
extraordinary returns. Refuse projects become more profitable than transit
projects as the fleet size increases—probably because the larger refueling
window allows increased vehicle usage without increasing fueling capacity.
School bus projects require large fleets to provide a good ROR. The ROR
surpasses 6% with a 75-vehicle fleet and 10% with a 100-vehicle fleet. It then
maxes out at 21% ROR, which is quite a good investment for a municipal
government.
What Is the NPV of My Investment?
Transit buses are the best fleets to convert when judged by the NPV
metric because they use more fuel than the other fleets, which results in greater
fuel savings by the end of the project's life. The reason why transit fleets are
more profitable than refuse fleets when looking at NPV but less profitable
when looking at ROR is that they require a larger upfront investment. As
shown in Figure 8, a 300-transit-bus fleet, which requires an initial investment
of $11.8 million, has an NPV of $55 million. The NPV for transit fleets turns
positive at 11 buses, for refuse fleets at 14 trucks, and at 68 school buses.
What Is the Minimum Number of Vehicles Required to Break Even?
The minimum goal of an investor is to break even when taking into
account the cost of tying his money up for the life of the project. This is the
point in Figure 8 where the NPV of a project crosses from negative to positive,
and it is also the point in Figure 7 where the ROR reaches 6% (the discount
rate for municipal governments). Table 2 summarizes the minimum number of
vehicles to break even for the three main municipal fleets and various
combinations where vehicles of different types share municipal infrastructure.
Table 2. Minimum Number of Vehicles to Have a Positive NPV
or 6% ROR
Type of Vehicle
# of Vehicles
Transit Buses
11
School Buses
68
Refuse Trucks
14
1/2 Transit, 1/2 School
26
1/2 Transit, 1/2 Refuse
12
1/2 School, 1/2 Refuse
32
1/3 Each
22
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