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 the 2018 Edsel 550h, which

Hybrid cars are touted as a "green" alternative; however, the financial aspects of hybrid ownership are not as clear. Consider the 2018 Edsel 550h, which had a list price of $5,500 (including tax consequences) more than the comparable Edsel 550. Additionally, the annual ownership costs (other than fuel) for the hybrid were expected to be $470 more than the traditional sedan. The EPA mileage estimate was 26 mpg for the hybrid and 18 mpg for the traditional sedan.

a.

Assume that gasoline costs $3.80 per gallon and you plan to keep either car for six years. How many miles 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 and round your answer to nearest whole number, e.g., 32.)

b. If you drive 17,500 miles per year and keep either car for six years, what price per gallon would make the decision to buy the hybrid worthwhile, ignoring the time value of money? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
c. Gasoline costs $3.80 per gallon and you plan to keep either car for six years. How many miles per year would you need to drive to make the decision to buy the hybrid worthwhile? Assume the appropriate interest rate is 10 percent and all cash flows occur at the end of the year. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
d. If you drive 17,500 miles per year and keep either car for six years, what price per gallon would make the decision to buy the hybrid worthwhile? Assume the appropriate interest rate is 10 percent and all cash flows occur at the end of the year. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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

Step: 3

blur-text-image

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

Analysis For Financial Management

Authors: Robert C. Higgins

5th Edition

0256167036, 9780256167030

More Books

Students also viewed these Finance questions

Question

What is adverse impact? How can it be proved?

Answered: 1 week ago