Cost-Benefit Analysis of Employee Vehicle Options: CHL Healthcare

This report provides a financial analysis comparing the BMW 6 series 640 ix drive and the Tesla model X 100 D for CHL Healthcare Pty Limited's employee vehicle reward program. The analysis considers the initial purchase cost, operating expenses, and trade-in values over a five-year period. The report employs Net Present Value (NPV) and Equivalent Annual Cost (EAC) methods to determine the more cost-effective option, taking into account a discount rate of 13% and conducting sensitivity analyses with rates of 12% and 14%. The findings indicate that while the initial purchase cost of the BMW is higher, the overall NPV and EAC analyses suggest it may be the more financially viable choice, although the differences are marginal. The report also highlights the environmental benefits of the Tesla, but focuses on the financial implications for the company's decision-making process. The report concludes with a recommendation based on the financial metrics, considering the company's goals of rewarding employees while managing costs effectively. This report can be found on Desklib, which provides past papers and solved assignments for students.

Running head: EMPLOYEE REWARD DECISION
Employee Reward Decision
Name of the Student:
Name of the University:
Author Note:

1EMPLOYEE REWARD DECISION
Executive summary:
The motivation to protect the environment creates a goodwill and good name for a company,
and if the company is a health care company it leads encouraging good health of the citizen
of the country. The company CHL Healthcare Pty Limited, is focused in reducing harmful
emissions from vehicles by purchasing electric vehicle for its employee. However the
company is also focused on the effect of the cost on the company and for that purpose the
company is looking at the alternative vehicle BMW 6 series 640 ix drive for its employee.
Hence the cost and benefit of both the vehicle is assessed in the report to decide which
vehicle to purchase. This would be done by the use of Net Present value and the Equivalent
Annual Cost Method. Also a sensitivity analysis would be done to see the impact of changing
discount rate on the cost of both the vehicles.

2EMPLOYEE REWARD DECISION
Table of Contents
Introduction:...............................................................................................................................3
Discussion:.................................................................................................................................3
BMW 6 series 640 ix drive:...................................................................................................3
Tesla model x 100 D:.............................................................................................................4
Analytical Assumptions:........................................................................................................4
Details of Tesla model X 100 D:............................................................................................5
Details of BMW 6 series 640 ix drive:...................................................................................6
Comparison of the two cars on the basis of cost and expenses:.............................................6
Trade in for both the cars:......................................................................................................7
Net Present value of BMW 6 Series 640 ix Drive:................................................................7
Net Present value of Tesla Model X 100 D:..........................................................................8
Comparison of the two vehicles on the basis of NPV:...........................................................9
Equivalent annual cost of the BMW 6 series 640 ix Drive:.................................................10
Equivalent annual cost of the Tesla Model X 100 D:..........................................................11
Comparison of the vehicles on the basis of EAA:...............................................................12
Conclusion:..............................................................................................................................13
References and Bibliographies:................................................................................................14

3EMPLOYEE REWARD DECISION
Introduction:
The analysis of various expansion projects and their viability is an optimistic business
strategy employed by a company. The company employs this strategy to establish an
expected cost and benefit incurred by the project. A similar expansion rather a rewarding
project has been undertaken by the company CHL Healthcare Pty Limited. The company is
providing services in the healthcare industry and looking to change its fleet of vehicles for its
employee. The eligible employee have performed exceptionally well and the company is
encouraging them by sponsoring luxury vehicles. The company is also focused on protecting
the environment by equipping electric vehicle like the Tesla model X 100 D. However, the
company is also focusing on the BMW 6 series 640 ix drive for cost purposes. The aim of
this report is to analyse the cost and the benefit of either vehicles and provide a conclusion on
the same (Tenhundfeld, de Visser and Finomore 2019).
Discussion:
BMW 6 series 640 ix drive:
BMW is a luxury car manufacturer which earlier used to manufacture aircraft engines.
The company is focused on producing vehicles which are performance efficient and create a
comfort experience for the user. The BMW 6 series 640 ix drive is the 6th generation vehicle
of the BMW Company. This vehicle is an upgrade to the older version of vehicles with
upgrade technology. The car has a mileage of 7.8 km per litre while it reaches the speed of 0-
100 km in just 5.4 seconds. This vehicle is a combination of performance and comfort. The
vehicle has seats for around four people to seat comfortably. Thus this vehicle is taken as an
option by the CHL Healthcare Pty Limited (Bmw.com.au.2019).

4EMPLOYEE REWARD DECISION
Tesla model x 100 D:
The Tesla Company is a company which manufactures premium electric vehicle. The
company was on the verge of bankruptcy but was revived and is now bringing about
luxurious and environment friendly premium electric vehicle. The tesla has various models
ranging from the model S to model X and also it is coming up with the tesla roadster. The
vehicle under consideration by the CHL Healthcare Pty Limited is the model X 100 D. This
car is a premium model in the electric vehicle segment. It can travel around 575 km on a
single charge in its long performance range. It can go 0-100 km in just 5.9 seconds. The car
comes with a 5 seat option which can be customized to 6 seat or 7 seat. Thus the car is a
premium in the electric range and also is protecting the environment by saving on the
consumption of petrol and reducing emissions (Tesla.com. 2019).
Analytical Assumptions:
The analysis or assessment of which vehicle to be taken for the purpose of change in
fleet is based on certain, but key factor assumptions which are,
Discount rate 13% which was given and 14% and 12%
showing upside and downside.
Fuel The Fuel cost rises by 25% in both the
cases.
Parking The parking cost rises by 5% in both the
cases.
Servicing The servicing cost rises by 10% in both the
cases.
Driver salary The salary of the driver is rising by 7.5% in
both the cases.

5EMPLOYEE REWARD DECISION
Details of Tesla model X 100 D:
The model Tesla model X 100 D is a car which is coming a lot of variants. The long
performance range is taken for the purpose of the analysis as this car is the most economical
to the company. The car costs around $157886 after all the charges, which are necessary to
purchase the car (Tesla.com. 2019).
Figure 1: Expense
Source: By the Author
The operating cost of the car is also a factor taken for the purpose of the calculation
and various variable expenses along with the benefits derived are taken. The benefits derived
are from the saving on petrol, since this is an electric car.
Figure 2: Expense
Source: By the Author

6EMPLOYEE REWARD DECISION
Details of BMW 6 series 640 ix drive:
The BMW 6 series 640 ix drive is a car which is the most luxurious in its class. The
car is costing around $ 158316. These are including all the charges for the car. The car
chosen is in the petrol variant (Bmw.com.au.2019).
Figure 3: Expense
Source: By the Author
The expenses which are incurred in the maintenance of the car over the five year
period are given below. These do not include the benefits, since the benefits are not derived
as it is a petrol car.
Figure 4: Expense
Source: By the Author
Comparison of the two cars on the basis of cost and expenses:
As per the initial purchase cost the BMW is costly while the Tesla is relatively less
expensive in this category. On the whole on the base of cost the Tesla seems to be relatively
expensive.

7EMPLOYEE REWARD DECISION
Trade in for both the cars:
The trade in car used for the Tesla Model X 100 D is the Toyota Prius of the year
2013 and the trade in car used for the BMW is the BMW 6 series which was launched in the
year 2012. Thus the value of both the vehicle has been used as an assumption and has been
taken as estimation for the purpose of analysis (Milowski, Singh and Ray 2018).
Net Present value of BMW 6 Series 640 ix Drive:
The NPV of BMW 6 series 640 ix Drive using 13% discount rate comes to around $
188033. This NPV is negative as it shows the cost which the company has ton bear.
Figure 5: NPV
Source: By the Author
The NPV of the car is also calculated by applying the scenario analysis, by changing
the discount rate to 12% and 14%. Thus a 1% positive and negative change is shown to
analyse the impact of the Net Present Value (Walters 2018).
Figure 6: NPV

8EMPLOYEE REWARD DECISION
Source: By the Author
If the discount rate is reduced to 12%, the present value of the vehicle is rising to
around $ 190630.
Figure 7: NPV
Source: By the Author
The present value of the vehicle is falling to around $ 185514, due to the rise in the
discount rate to 14%
Net Present value of Tesla Model X 100 D:
The NPV of Tesla model X 100 D using 13% discount rate comes to around $
188584. This NPV is also negative as this would be the cost which the company will have to
bear if it purchases that vehicle.
Figure 8: NPV
Source: By the Author
The following shows the NPV of the BMW at 12% and 14% discount rate.

9EMPLOYEE REWARD DECISION
Figure 9: NPV
Source: By the Author
If the discount rate of the model is changed to 12%, the present value of the car is
increased to around $ 191226. Thus the overall cost of the car is affected by the change in the
discount rate.
Figure 10: NPV
Source: By the Author
Thus at the 14% discount rate the NPV of the Tesla car comes to about $186021.
Thus with the increase in the discount rate the cost of the vehicle falls.
Comparison of the two vehicles on the basis of NPV:
As per the Net Present Value the Tesla seems to be a costly car as it has the Net
Present Value which is higher. Thus the cost to purchase the Tesla car is higher.
Thus, on the basis Net Present value at the discount rate of 13% the company should
purchase the BMW, as it has the lowest Net Present Value. At the 14% discount rate the

10EMPLOYEE REWARD DECISION
BMW seems to have a lower cost at $ 185514 and the Tesla has a cost around $ 1860221.
Thus both the cost have reduced at the 14% discount rate. Thus at the 12% discount rate the
BMW has a cost of $ 190630 and the Tesla has a cost of $ 191226. Thus both the cost has
risen with the cost of the Tesla being more than the BMW (Heydt 2017).
Thus on the basis of the overall analysis the BMW seems to be a more viable option
than Tesla. However the difference between the two NPV is minute. Thus the company can
choose either the Tesla or the BMW.
Equivalent annual cost of the BMW 6 series 640 ix Drive:
The equivalent annual cost is the cost which the company has to bear if it purchases
the car. Thus the car if purchased will generate that much cost annually to the company.
Figure 11: EAA for 13%
Source: By the Author
Thus if the BMW car is purchased the per year cost is the lowest if the car is held for
five years and keeps on increasing if the holding period of the car is reduced. This cost are
generated at the 13% discount rate (Yemshano and McKenney 2015).
Figure 12: EAA for 14%

11EMPLOYEE REWARD DECISION
Source: By the Author
When the discount rate is increased at 14%, the equivalent annual cost of the car is
increased. Thus the lowest if the car is held for five years and the highest when held for the
period of one year.
Figure 13: EAA for 12%
Source: By the Author
As the discount rate reduced to 12% level the operating expense of the vehicle
reduced and the lowest at the five year level and the highest at the one year level.
Equivalent annual cost of the Tesla Model X 100 D:
The equivalent annual cost of the Tesla Model X 100 D at the 13% discount rate is
given in the table below,
Figure 14: EAA for 13%
Source: By the Author
Thus the costs which are annual show that the cost are less if they are held for the
period of five years and the highest if held for one year.