Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Hybrid cars are touted as a green alternative; however, the financial aspects of hybrid ownership are not as clear. Consider a 2015 Lexus RX 450h,

Hybrid cars are touted as a green alternative; however, the financial aspects of hybrid ownership are not as clear. Consider a 2015 Lexus RX 450h, which had a list price of $5,515 (including tax consequences) more than a Lexus RX 350. Additionally, the annual ownership costs (other than fuel) for the hybrid were expected to be $200 more than the traditional sedan. The mileage estimate was 5.8 litre/100 km for the hybrid and 7.5 for the traditional sedan. a. Assume that gasoline costs $2.15 per litre and you plan to keep either car for six years. How many kilometres 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. Round the final answer to 2 decimal places.) Kilometres per year b. If you drive 14,000 km per year and keep either car for six years, what price per litre would make the decision to buy the hybrid worthwhile, ignoring the time value of money? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Price per litre $ c-1. Gasoline costs $2.15 per litre and you plan to keep either car for six years. How many kilometres per year would you need to drive to make the decision to buy the hybrid worthwhile? Assume the appropriate interest rate is 15% and all cash flows occur at the end of the year. (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Kilometres per year c-2. If you drive 14,000 km per year and keep either car for six years, what price per litre would make the decision to buy the hybrid worthwhile? Assume the appropriate interest rate is 15% and all cash flows occur at the end of the year. (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Price per litre $ Please don't copy and paste wrong answers.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managing Finance

Authors: CMI Books

1st Edition

1781252181, 978-1781252185

More Books

Students also viewed these Finance questions