< Previous | Next | Content >

## The Problem

Your city local government wants to introduce a new bus system for elderly people. As a consultant, you are hired to perform the economic feasibility analysis of the new system. You did simple survey to the bus dealer and the bus companies and the elderly people and got information of the existing bus system, and preference of bus users. The local government insists that the maximum fare should be one dollar per trip flat fare. Two types of buses are being proposed with characteristic given in the table below:

 Proposed Mini Van Type Mini Bus Type Purchasing price \$20,000 \$40,000 Usage Year 3 years 5 years Vehicle Capacity 10 passengers 20 passengers Operating speed 20 km/hour 20 km/hour Unit gasoline 9 km/liter 5 km/liter Unit Engine Oil 5000 km/can 2000 km/can Number of Tires 4 6 Tire price 87.5 per tire \$100 per tire Unit tire 25000 km 20000 km Salvage Value 10% of Purchasing price 5% of Purchasing price Driver salary \$2000/month \$2500/month Load Factor 0.8 0.7

The usage year is set based on the company guarantee that the vehicle does not need any repair. We also assume zero accident.

They also want to know the answer of the following problems:

1. Among two types of proposed buses, which one is the most feasible?
2. How much subsidy should the local government provide per year? The maximum subsidy is \$1000 per bus.
3. How sensitive is the feasibility from the fluctuation of the demand? What is the threshold boundary of Load Factor?

Other information that you may need including

 Gasoline price \$1.25/liter Engine oil price \$30/can Number of working days 350 days/year Number of operating hours 12 hours/day Interest rate 3% per year Reduce time due to boarding and alighting 1.5 minutes/passenger Distance from origin to destination 5 km

< Previous | Next | Content >

Preferable reference for this tutorial is

Teknomo, Kardi (2006) Tutorial on Feasibility Study. http://people.revoledu.com/kardi/tutorial/What-If-Analysis/index.html