An auto dealership is trying to determine the appropriate price for its new Hybrid car based on customer economic value as well as its internal
An auto dealership is trying to determine the appropriate price for its new Hybrid car based on customer economic value as well as its internal costs. Given a high level of brand loyalty among the customers of this brand, the assessment of economic value is to be carried out with respect to the same brand that has either a hybrid or conventional engine. Here is the side-by-side performance comparison of two otherwise identical models: Car with conventional gas- Car with hyrid engine powered engine Price to Buyer $26,000 TBD Gas Mileage (MPG) 28 City/36 Hwy 45 City/50 Hwy Typical Ownership 8 Years 8 Years Yearly Maintenance Costs (Avg.) $700 $500 Yearly Insurance Cost $600 $500 Tax Credit $0 $3,000 Trade-in Value at 8 Years $4,000 $3,000 Other Information: The Tax Credit is only given one time. The price of gasoline is $3.00 per gallon. There are two segments of customers: Highway drivers and City drivers. Both types drive 12,000 miles each year. The Highway segment does 25% city driving and 75% highway driving. The City segment does 75% city driving and 25% highway driving
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