Increasingly, there are calls to manufacture hybrid or electric cars for businesses and individuals. Both groups purchase these cars to be environmentally friendly. However, there is an ongoing debate about whether these hybrid or electric cars are truly more environmentally friendly than the traditional gas-engine models. More importantly, does the additional cost of the hybrid or electric model get offset by future operating costs (i.e. fuel cost savings).

1. Select a car that has a traditional gas-engine model and a hybrid or electric model (i.e. Honda Civic). Make the assumption that the car will be driven for five years and the annual miles driven will be 12,000 miles. Then use ten years with the same 12,000 miles per year. Decide on an estimate for the cost per gallon of gas (i.e. truck will cost more than a compact car).

2. Research the initial cost of the traditional gas-engine and the hybrid or electric model. Be sure to include all the upfront cost including taxes. You do not need to do both hybrid or electric. You can pick one to compare against the gas-engine model. If you find a car that has all three model types and you compare all three, that will be extra credit. Then estimate the annual operating cost (fuel cost, insurance, maintenance, etc.). Calculate the present value of the cost of owning this vehicle with the gas-engine vs. the hybrid or electric model. Use a 6% discount rate. Then use a 10% discount rate. Does that make any difference?

3. Compare the cost of the two or three models. After comparing the costs, research the environmental issues associated with the two or three car models. Incorporate any sustainability issues on both sides. Formulate arguments to support your recommendation for the gas-engine or hybrid/electric model. Debate which model is more desirable for businesses to buy. Be specific in your reasons and cite your information sources.