Hybrid cars are touted as a "green" alternative; however, the
financial aspects of hybrid ownership are not as clear. Consider
the 2014 Edsel 550h, which had a list price of $5,300 (including
tax consequences) more than the comparable Edsel 550. Additionally,
the annual ownership costs (other than fuel) for the hybrid were
expected to be $450 more than the traditional sedan. The EPA
mileage estimate was 30 mpg for the hybrid and 22 mpg for the
traditional sedan.
| a. |
Assume that gasoline costs $3.70 per gallon and you plan to keep
either car for six years. How many miles per year would you need to
drive to make the decision to buy the hybrid worthwhile, ignoring
the time value of money? (Do not round intermediate
calculations and round your answer to nearest whole number, e.g.,
32.)
|
| b. |
If you drive 16,500 miles per year and keep either car for six
years, what price per gallon would make the decision to buy the
hybrid worthwhile, ignoring the time value of money? (Do
not round intermediate calculations and round your answer to 2
decimal places, e.g., 32.16.)
|
| c. |
Gasoline costs $3.70 per gallon and you plan to keep either car
for six years. How many miles per year would you need to drive to
make the decision to buy the hybrid worthwhile? Assume the
appropriate interest rate is 10 percent and all cash flows occur at
the end of the year. (Do not round intermediate
calculations and round your answer to the nearest whole number,
e.g., 32.)
|
| d. |
If you drive 16,500 miles per year and keep either car for six
years, what price per gallon would make the decision to buy the
hybrid worthwhile? Assume the appropriate interest rate is 10
percent and all cash flows occur at the end of the year.
(Do not round intermediate calculations and round your
answer to 2 decimal places, e.g., 32.16.)
|
