Hybrid cars are touted as a "green" alternative; however, the financial aspects of hybridownership are not as clear. Consider the 2020 Edsel 550h, which had a list price of$5,300 (including tax consequences) more than the comparable gasoline-only Edsel550. Additionally, the annual ownership costs (other than fuel) for the hybrid wereexpected to be $340 more than the traditional sedan. The EPA mileage estimate was 28mpg for the hybrid and 20 mpg for the traditional sedan.a. Assume that gasoline costs $3.15 per gallon and you plan to keep either car for sixyears. How many miles per year would you need to drive to make the decision to buythe hybrid worthwhile, ignoring the time value of money? (Do not round intermediatecalculations and round your answer to nearest whole number, e.g., 32.)b. If you drive 15,500 miles per year and keep either car for six years, what price pergallon would make the decision to buy the hybrid worthwhile, ignoring the time valueof money? (Do not round intermediate calculations and round your answer to 2decimal places, e.g., 32.16.)c. Gasoline costs $3.15 per gallon and you plan to keep either car for six years. Howmany miles per year would you need to drive to make the decision to buy the hybridworthwhile? Assume the appropriate interest rate is 10 percent and all cash flowsoccur at the end of the year. (Do not round intermediate calculations and round youranswer to the nearest whole number, e.g., 32.)d. If you drive 15,500 miles per year and keep either car for six years, what price pergallon would make the decision to buy the hybrid worthwhile? Assume theappropriate 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 decimalplaces, e.g., 32.16.)a. Miles per yearb. Price per gallonc. Miles per yeard. Price per gallon

Total additional cost = list price + no. of years * additional cost= 5300 + 6 X 340= 7340

Answered: brid cars are touted as a "green"…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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