Taglioni's Pizza Company has to choose a new delivery car from among three alternatives. Assume that gasoline costs $\$ 1.30$ per gallon and that the firm's cost of capital is 12 percent. The car will be driven 12,000 miles per year.

1. Which car should the company purchase?
2. How would your answer change if the price of gasoline increased to $\$ 2$ per gallon?

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Car 1 Car 2 Car 3 Cost $12,000 $4,000 $8,000 Mileage per gallon 40 B 12 Useful life.... 5 years 5 years 5 years Salvage value $2,000 $500 $1,000