Video with starting point information: https://www.youtube.com/watch?v=_G_fTYbyX_I&feature=youtu.be&ab_channel=OnlineClassesContent

Begin by replicating the analysis done in the video using a spreadsheet, then use your spreadsheet to answer the questions.

This is what I have, unsure if it is correct.

Redo the analysis assuming that gas costs $4.00/gallon. What is the Present Value of the purchase decision?

(Recall, in the example I showed, the present value was -498.911).

The negative number indicates that the hybrid was not cost-effective, a positive number would indicate the hybrid would be cost-effective.

Now, redo the analysis assuming that gas costs $3.00/gallon. What is the Present Value of the purchase decision?

Use your spreadsheet to figure out the "break-even" price of gas. What price of gas (to the nearest penny) makes the Present Value (approximately) zero?

Vehicle Purchase: Assumptions . . Will own car for 6 years (about average) Will drive 12,000 miles per year (half city, half highway) Vehicle depreciates at 10% Gas: 2.50/gallon Discount rate: 5% Vehicle Comparison Sonata SEL Sonata Hybrid SEL MSRP: $29,900 EPA MPG: 45/51/47 Fuel Required: 255 gallons/year Fuel Costs: $638/year Value after 6 years: $17,655 MSRP: $25,700 EPA MPG: 27/37/31 Fuel Required: 387 gallons/year Fuel Costs: $968/year Value in year 6: $15,176 . Vehicle Purchase: Summary Hybrid costs $4,200 extra (29,900-25,700) Hybrid saves $330/year (reduced fuel costs) Hybrid worth $2,479 more after 6 years (17,655-15,176) Cash Flows: . Year 4. 5 0 -3870 1 330 2 330 3 330 Cash Flow 330 2809 Note: Year 0: -3870=-4200+330 Year 5: 2809=330+2479 Vehicle Purchase: Present Value Final result: negative present value Year 0 1 2 3 4 5 -3870 330 330 330 330 1 2809 Cash Flow Present Value -3870 314.2857 299.3197 285.0664 271.4918 2200.925 Total: -498.911 Note: undiscounted total: $259 i 0.05 t Cash Flow PV 0 -3000 1 2 100 200 95.2381 181.4059 3 400 345.535 4 5 800 2000 658.162 1567.052 -3000 Total -152.607 45 151 147 250 gal lyr fuul vost (638) unmatter & yk 4 17,655 27/37131 387 gM lyr the costs (968) f 15, 176 w/44 Igal $1,040 / gr $1,548 * savy $528 0 can now 1 2 3 4 s 528 528 -3,672 528 528 3,007 -3,672/50 2.857/582.12 456.10 6/434.387/2356.063 478.912 Total: [556.325] w/43 Igal: [-147.165 $765 men her 4396 0 -3,804 1 396 377.143 2 396 1359.184 3 4 396 396 2875 |342.080/325.790/2252.63 1-147.165 -3,804 Vehicle Purchase: Assumptions . . Will own car for 6 years (about average) Will drive 12,000 miles per year (half city, half highway) Vehicle depreciates at 10% Gas: 2.50/gallon Discount rate: 5% Vehicle Comparison Sonata SEL Sonata Hybrid SEL MSRP: $29,900 EPA MPG: 45/51/47 Fuel Required: 255 gallons/year Fuel Costs: $638/year Value after 6 years: $17,655 MSRP: $25,700 EPA MPG: 27/37/31 Fuel Required: 387 gallons/year Fuel Costs: $968/year Value in year 6: $15,176 . Vehicle Purchase: Summary Hybrid costs $4,200 extra (29,900-25,700) Hybrid saves $330/year (reduced fuel costs) Hybrid worth $2,479 more after 6 years (17,655-15,176) Cash Flows: . Year 4. 5 0 -3870 1 330 2 330 3 330 Cash Flow 330 2809 Note: Year 0: -3870=-4200+330 Year 5: 2809=330+2479 Vehicle Purchase: Present Value Final result: negative present value Year 0 1 2 3 4 5 -3870 330 330 330 330 1 2809 Cash Flow Present Value -3870 314.2857 299.3197 285.0664 271.4918 2200.925 Total: -498.911 Note: undiscounted total: $259 i 0.05 t Cash Flow PV 0 -3000 1 2 100 200 95.2381 181.4059 3 400 345.535 4 5 800 2000 658.162 1567.052 -3000 Total -152.607 45 151 147 250 gal lyr fuul vost (638) unmatter & yk 4 17,655 27/37131 387 gM lyr the costs (968) f 15, 176 w/44 Igal $1,040 / gr $1,548 * savy $528 0 can now 1 2 3 4 s 528 528 -3,672 528 528 3,007 -3,672/50 2.857/582.12 456.10 6/434.387/2356.063 478.912 Total: [556.325] w/43 Igal: [-147.165 $765 men her 4396 0 -3,804 1 396 377.143 2 396 1359.184 3 4 396 396 2875 |342.080/325.790/2252.63 1-147.165 -3,804