(a) Toyota motors sells two similar sized cars in Hong Kong. The Corolla (petrol engine) costs

HK$ 210,000 while the Prius (petrol+electric engine) costs HK$ 305,000. The Corolla uses

23Km/L, while the Prius uses 27Km/L of petrol. Assuming an interest rate of 5%, and a useful life

of 10 years, and average annual usage of 20000Km, what is the break-even cost of petrol at which

the two cars are economically equivalent.

(b) Assuming that the vehicles can last for the same period, write the equation for the sensitivity

of the break-even price of petrol to the annual usage?

[Hint: assume that the annual usage is 20000X Km].