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Are you thinking of bypassing a gasolinefueled car in favor of a hybrid (gasoline and electric) automobile? Let's take a look at the relative economics
Are you thinking of bypassing a gasolinefueled car in favor of a hybrid (gasoline and electric) automobile? Let's take a look at the relative economics of your possible choice. The gasoline-fueled car sells for $19,000 and gets 25 miles per gallon (mpg) of fuel. The alternative hybrid vehicle sells for $25,000 and averages 59.7 mpg. The resale value of the hybrid car is $1,500 more than that of the gasoline-only car after five years of anticipated ownership. If you drive 14,000 miles per year and gasoline costs $4.50 per gallon, what is the internal rate of return on the incremental investment in the hybrid automobile? Using the trial-and-error method, the internal rate of return is % Round to one decimal place Based on this analysis, if your investments typically give you a MARR is 12%, which vehicle should you buy? O A. Gasoline O B. Hybrid
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