Question 2
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 $5,200 (including tax consequences) more than the comparable Edsel 550. Additionally, the annual ownership costs (other than fuel) for the hybrid were expected to be $440 more than the traditional sedan. The EPA mileage estimate was 29 mpg for the hybrid and 21 mpg for the traditional sedan. a. Assume that gasoline costs $3.65 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 16,000 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 $3.65 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 16,000 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.) a. Miles per year b. Price per gallon C. Miles per year d. Price per gallon Gilmore, Inc., had equity of $130,000 at the beginning of the year. At the end of the year, the company had total assets of $285,000. During the year, the company sold no new equity. Net Income for the year was $28,000 and dividends were $3,200. a. What is the sustainable growth rate for the company? (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the sustainable growth rate if you use the formula ROE band beginning of period equity? (Do not round Intermedlate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What is the sustainable growth rate if you use end of period equity in this formula? (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Sustainable growth rate b. ROE *b (using beginning of period equity) ROE b (using end of period equity) % c. %
