A bunch of the SAs at work started doing some back of the napkin calculations around the "Cash for Clunkers" program. As SAs we often deal with very similar calculations. For example, we often ask: "How much money will we save over x time if we get rid of old busted technology in favor of the new hotness?" Improvements to technology typically come with a cost and benefit. What are the costs and benefits here?
A lot of assumptions here, but this is just a quick ball park: -- low -- $3B in spending / $3,500 per car = 857,142 new cars 857,142 new cars x 4mpg saved = 3,428,496 gallons saved per mile driven 3,428,496 x 625 m/mo (37% fed est) = 2,142,810,000 gallons saved/month 2,142,810,000 gs/mo x $2.50/g = $5,357,025,000 reduced fuel spending 2,142,810,000 gs/mo x $0.46/g = $985,692,600 reduced tax revenue -- high -- $3B in spending / $4,500 per car = 666,666 new cars 666,666 new cars x 10mpg saved = 6,666,666 gallons saved per mile driven 6,666,666 x 625 m/mo (37% fed est) = 4,166,666 gallons saved/month 4,166,666,250 gs/mo x $2.50/g = $10,416,665,625 reduced fuel spending 4,166,666,250 gs/mo x $0.46/g = $1,916,666,475 reduced tax revenue There are a lot of hidden costs and dependencies. There are some hidden benefits as well. We will have to wait and see, but a few of us are predicting much higher gas prices as a mid-term result. What will be the impact of taking up to 23 billion dollars of taxes out of the system? How much new tax revenue be generated by new car sales? How much tax revenue did we plan on loosing any way through natural market growth? How many people using this clunkers program would have purchased a car anyway without it? Normally a person would trade in a clunker, and the dealer would sell that clunker. What will this do to used car sales & additional revenue+taxes from the used cars? The questions go on, and on, and on. -Ryan /* PLUG: http://plug.org, #utah on irc.freenode.net Unsubscribe: http://plug.org/mailman/options/plug Don't fear the penguin. */
