The following starting data is for a luxury vehicle. Calculate the LCOM in €/km to 2 decimal places.Vehicle: 2019 BMW M5 Average fuel consumption (kWh/km): 0
Average fuel consumption (L/km): 0.099 Cost of electricity (€/kWh): 0.15 Cost of fuel (€/L): 1.55 Annual distance driven (km): 20 000 Lifetime of vehicle (years): 6
Capex of vehicle (€): 179 000 Fixed opex (% of capex): 1% Interest rate annually: 1%

Question

BlackTom AI · Accepted Answer

We start by identifying the key inputs and what LCOM represents in this context: the life-cycle cost per kilometer over the vehicle’s lifetime.
First, compute the total distance the vehicle will cover over its lifetime: annual distance 20,000 km multiplied by lifetime 6 years gives 120,000 km total.
Next, determine the annual and total operating costs from the data provided. The vehicle uses fuel with a consumption of 0.099 L/km and fuel cost €1.55 per liter. Multiply these to get the cost per kilometer for fuel: 0.099 L/km × €1.55/L = €0.15345 per km. Since electricity consumption is 0 kWh/km, there is no electricity cost contributed by the energy data.
The fixed operating expense is given as 1% of capital expenditure per year. With Capex = €179,000, the annual fixed opex is 0.01 × €179,000 = €1,790 per year. Over the 6-year lifetime, the total fixed opex is €1,790 × 6 = €10,740.
Now assemble the total lifetime cost. A straightforward approach sums the initial capex, total fixed opex over the lifetime, and total fuel cost over the lifetime: 
- Capex: €179,000
- Fixed opex (total for 6 years): €10,740
- Fuel cost over lifetime: distance × cost per km = 120,000 km × €0.15345/km = €18,414
Add these together: €179,000 + €10,740 + €18,414 = €208,154 total lifetime cost.
Finally, divide the total lifetime cost by the total lifetime distance to obtain LCOM: €208,154 / 120,000 km = €1.73455 per km, which rounds to €1.73 per km to two decimals.
If different conventions are used for financing costs (for example, treating interest on capex separately or financing depreciation differently), the result can shift slightly. For instance, a different treatment of financing could yield a higher value, but with the inputs and a straightforward summation of capex, fixed opex, and fuel, the computed LCOM is approximately €1.73 per km.

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