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 $5,965 (including tax consequences) more than a Lexus RX 350. Additionally, the annual ownership costs (other than fuel) for the hybrid were expected to be $340 more than the traditional sedan. The mileage estimate was 5.4 litre/100 km for the hybrid and 7.1 for the traditional sedan.

a. Assume that gasoline costs $1.75 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 15,400 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 $1.75 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 14% 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 15,400 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 14% 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