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Toyota will bring hybrid electric automobiles to market next year priced at $27,000 (this includes a $6,750 federal tax credit). At $1.89 per gallon of
Toyota will bring hybrid electric automobiles to market next year priced at $27,000 (this includes a $6,750 federal tax credit). At $1.89 per gallon of gasoline, it will take 9 years to recoup the difference in price between a base model Toyota Camry and its four-cylinder gasoline-only counterpart. The price difference is $3,600. If the hybrid vehicle is driven for 14 years, what is the internal rate of return on the extra investment in the hybrid? The internal rate of return on the extra investment in the hybrid is 2.5%. (Round to one decimal place.)
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