Are you thinking of bypassing a gasoline-fueled car in favor of a hybrid (gasoline and electric) automobile? Let's take a look at the relative economics of your possible choice. Let's say the gasoline-fueled car sells for $19,000 and gets 25 miles per gallon (mpg) of fuel, while the competing hybrid car sells for $24,000 and averages 36.1 mpg. The expected resale value of the hybrid car is $8,400 and that of the gasoline-only car is $5,900 after five years of anticipated ownership. If you drive 15,000 miles per year and gasoline cost will average $4.00per gallon, what is the internal rate of return (IRR) on the incremental investment in the hybrid automobile relative to the gasoline-only car? Assume that all other maintenance and operating costs are the same for the two vehicles.

Using the "trial-and-error" method, the incremental IRR is _________%

Based on this analysis, if your investments typically give you a MARR is 5%, which vehicle should you buy?

GAS OR HYBRID