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In this Capital Budgeting Activity, you will be evaluating whether you should purchase a hybrid car or its gasoline - engine counterpart. Select two car
In this Capital Budgeting Activity, you will be evaluating whether you should purchase a hybrid car or its gasolineengine counterpart. Select two car models that are similar, with one being a hybrid model and one being the nonhybrid model. For example, the Honda Civic is available as a hybrid or a gasolineengine model. Assume that you plan on keeping your car for years and that at the end of the year, the resale value of both models will be negligible. Use the Federal Reserve Bank Prime Loan rate for your discount interest rate. Required: Research the cost of each model include estimated taxes and title costs Also, obtain an estimate of the milespergallon fuel efficiency of each model. Estimate the number of miles you drive each year. Also estimate the costs of a gallon of fuel. Given your previous estimate from and estimate the total cost of driving the hybrid model for one year. Also estimate the total cost of driving the nonhybrid model for one year. Calculate the savings offered by the hybrid model over the nonhybrid model Calculate the NPV of the hybrid model, using the annual fuel savings as the annual cash inflow for the years you would own the car. Compare the NPV of the hybrid model with cost of the cost of the gasolineengine model. Which model has the lowest the lowest NPV From a financial standpoint, does the hybrid model make sense? Now look at the payback period of the hybrid model. Use the difference between the cost of the hybrid model and the gasolineengine model as the investment. Use the annual fuel savings as the expected annual net cash inflow. Ignoring the time value of money, how long does it take for the additional cost of the hybrid model to pay for itself through fuel savings? What qualitative factors might affect your decision about which model to purchase? I've picked these cars out already MODEL: TOYOTA CORROLA LE STARTING PRICE: MILEAGE: MODEL: TOYOTA CORROLA LE HYBRID STARTING PRICE: MILEAGE: Let's assume one drives miles Summit backup of all sources NOT website links and show ALL calculations in good form DO NOT USE EXCEL FORMULAS
In this Capital Budgeting Activity, you will be evaluating whether you should purchase a hybrid car or its gasolineengine counterpart. Select two car models that are similar, with one being a hybrid model and one being the nonhybrid model. For example, the Honda Civic is available as a hybrid or a gasolineengine model. Assume that you plan on keeping your car for years and that at the end of the year, the resale value of both models will be negligible. Use the Federal Reserve Bank Prime Loan rate for your discount interest rate.
Required:
Research the cost of each model include estimated taxes and title costs Also, obtain an estimate of the milespergallon fuel efficiency of each model.
Estimate the number of miles you drive each year. Also estimate the costs of a gallon of fuel.
Given your previous estimate from and estimate the total cost of driving the hybrid model for one year. Also estimate the total cost of driving the nonhybrid model for one year. Calculate the savings offered by the hybrid model over the nonhybrid model
Calculate the NPV of the hybrid model, using the annual fuel savings as the annual cash inflow for the years you would own the car.
Compare the NPV of the hybrid model with cost of the cost of the gasolineengine model. Which model has the lowest the lowest NPV From a financial standpoint, does the hybrid model make sense?
Now look at the payback period of the hybrid model. Use the difference between the cost of the hybrid model and the gasolineengine model as the investment. Use the annual fuel savings as the expected annual net cash inflow. Ignoring the time value of money, how long does it take for the additional cost of the hybrid model to pay for itself through fuel savings?
What qualitative factors might affect your decision about which model to purchase?
I've picked these cars out already
MODEL: TOYOTA CORROLA LE
STARTING PRICE:
MILEAGE:
MODEL: TOYOTA CORROLA LE HYBRID
STARTING PRICE:
MILEAGE:
Let's assume one drives miles
Summit backup of all sources NOT website links and show ALL calculations in good form DO NOT USE EXCEL FORMULAS
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