COST management
Cost Management and Analysis (22753)
Energy Efficiency Initiative
Executive summary
Introduction
This report is an evaluation and recommendation for CSR about an investment in new forklifts in order to replace the100 old diesel forklifts (3.5 tonnes,TCM) mainly used indoors at the group’s plants and distributions sites. There are three alternatives which best meets CSR’s needs; the gas, the electrical and the bio-diesel.
The three alternatives in the capital expenditure proposal fall under scope 1 and 2 of the Clean Energy Act 2011. The carbon emissions for the gas and bio-diesel option are taxed at $23 per tonne of CO2 and index annually whilst the battery option is taxed at 10% of electricity cost. Each proposed forklift decreases incremental carbon emissions by between 1,965 and 3,500 tonnes per year.
Sensitivity analysis compared the options against variances in inflation of costs at 2%, 7% and 10%. This analysis showed that the available options are not sensitive to cost changes. NPV and IRR remains’ positive for all options of sensitivity analysis. Table 1. Sensitivity analysis
(000 's)
2% (-2%)
4%
7% (+3%)
10% (6%)
NPV
IRR
NPV
IRR
NPV
IRR
NPV
IRR
Gas
$3,302.70
34%
$3,772.49
35%
$4,577.42
38%
$5,521.53
40%
Battery
$2,574.25
28%
$3,004.41
30%
$2,574.25
32%
$4,605.90
35%
Bio Diesel
$2,812.34
29%
$3,249.17
31%
$3,997.59
33%
$4,875.44
36%
The key findings are that when using the NPV model to evaluate the future benefits of the capital investment and the cash flows, all three alternatives were positive and the gas forklift had the best NPV at $3.2m at 4% inflation rate (Table 1). This was also confirmed when using the IRR model with discount rate at 12.5% all alternatives exceeded the discount rate, and the gas forklift had the highest IRR at 35% (Table 1). This project has also an effect on CSR’s CO2 emission, with new fuel types they will decrease the group’s share of emissions.
The three forklift
Energy Efficiency Initiative
Executive summary
Introduction
This report is an evaluation and recommendation for CSR about an investment in new forklifts in order to replace the100 old diesel forklifts (3.5 tonnes,TCM) mainly used indoors at the group’s plants and distributions sites. There are three alternatives which best meets CSR’s needs; the gas, the electrical and the bio-diesel.
The three alternatives in the capital expenditure proposal fall under scope 1 and 2 of the Clean Energy Act 2011. The carbon emissions for the gas and bio-diesel option are taxed at $23 per tonne of CO2 and index annually whilst the battery option is taxed at 10% of electricity cost. Each proposed forklift decreases incremental carbon emissions by between 1,965 and 3,500 tonnes per year.
Sensitivity analysis compared the options against variances in inflation of costs at 2%, 7% and 10%. This analysis showed that the available options are not sensitive to cost changes. NPV and IRR remains’ positive for all options of sensitivity analysis. Table 1. Sensitivity analysis
(000 's)
2% (-2%)
4%
7% (+3%)
10% (6%)
NPV
IRR
NPV
IRR
NPV
IRR
NPV
IRR
Gas
$3,302.70
34%
$3,772.49
35%
$4,577.42
38%
$5,521.53
40%
Battery
$2,574.25
28%
$3,004.41
30%
$2,574.25
32%
$4,605.90
35%
Bio Diesel
$2,812.34
29%
$3,249.17
31%
$3,997.59
33%
$4,875.44
36%
The key findings are that when using the NPV model to evaluate the future benefits of the capital investment and the cash flows, all three alternatives were positive and the gas forklift had the best NPV at $3.2m at 4% inflation rate (Table 1). This was also confirmed when using the IRR model with discount rate at 12.5% all alternatives exceeded the discount rate, and the gas forklift had the highest IRR at 35% (Table 1). This project has also an effect on CSR’s CO2 emission, with new fuel types they will decrease the group’s share of emissions.
The three forklift
References: Commlaw 2011, Clean Energy Act 2011, viewed 12 May 2013 CSR 2012, Sustainability Report 2012, viewed 10 May 2013, TCM 2013a, FB 35-7, FB-VII Series – Electric Forklift Truck, viewed 10 May 2013, < http://www.tcmforklifts.com.au/files/product_categories_files/TCM_FB35-76379007.pdf> TCM 2013b, FD359T, NTP Forklifts Australia, viewed 10 May 2013, TCM 2013c, FG35T9, TCM Advanced Mechanical and Operational Functions Engine Powered “Forklift Trucks”, viewed 10 May 2013,