Hag question Payback Period and NPV of a Cost Reduction Proposal-Differential Analysis Mary Zimmerman decided to purchase a new automobile. Being concerned about environmental issues, she is leaning toward the hybrid rat than the completely gasoline four-cylinder model. Nevertheless, as a new business school graduate, she wants to determine if there is an economic justification for purchasing the hybrid, which costs $1,600 more than the regular VUE. She has determined that city/highway combi gas mileage of the Green VUE and regular VUE models are 27 and 23 miles per gallon respectively. Mary anticipates she will travel an average 12,000 miles per year for the next several years. (Round all of your answers to two decimal places. For example, enter 8.84 for 8.844 and 8.85 for 8.845.) (a) Determine the payback period of the incremental investment if gasoline costs $3.50 per gallon. x years (b) Assuming that Mary plans to keep the car five years and does not believe there will be a trade-in premium associated withthe hybrid model, determine the net present value of the incremental investment at an eight percent time value of money. (Use a negative sign with your answer.) $ 0 X (c) Determine the cost of gasoline required for a payback period of three $ 0 x per gallon years. (d) At $3.50 per gallon, determine the VUE Green combined gas mileage required for a payback period of three years. 0 x miles per gallon Check
Hag question Payback Period and NPV of a Cost Reduction Proposal-Differential Analysis Mary Zimmerman decided to purchase a new automobile. Being concerned about environmental issues, she is leaning toward the hybrid rat than the completely gasoline four-cylinder model. Nevertheless, as a new business school graduate, she wants to determine if there is an economic justification for purchasing the hybrid, which costs $1,600 more than the regular VUE. She has determined that city/highway combi gas mileage of the Green VUE and regular VUE models are 27 and 23 miles per gallon respectively. Mary anticipates she will travel an average 12,000 miles per year for the next several years. (Round all of your answers to two decimal places. For example, enter 8.84 for 8.844 and 8.85 for 8.845.) (a) Determine the payback period of the incremental investment if gasoline costs $3.50 per gallon. x years (b) Assuming that Mary plans to keep the car five years and does not believe there will be a trade-in premium associated withthe hybrid model, determine the net present value of the incremental investment at an eight percent time value of money. (Use a negative sign with your answer.) $ 0 X (c) Determine the cost of gasoline required for a payback period of three $ 0 x per gallon years. (d) At $3.50 per gallon, determine the VUE Green combined gas mileage required for a payback period of three years. 0 x miles per gallon Check
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Hag question
Payback Period and NPV of a Cost Reduction Proposal-Differential Analysis
Mary Zimmerman decided to purchase a new automobile. Being concerned about environmental issues, she is leaning toward the hybrid rat
than the completely gasoline four-cylinder model. Nevertheless, as a new business school graduate, she wants to determine if there is an
economic justification for purchasing the hybrid, which costs $1,600 more than the regular VUE. She has determined that city/highway combi
gas mileage of the Green VUE and regular VUE models are 27 and 23 miles per gallon respectively. Mary anticipates she will travel an average
12,000 miles per year for the next several years.
(Round all of your answers to two decimal places. For example, enter 8.84 for 8.844 and 8.85 for 8.845.)
(a) Determine the payback period of the incremental investment if gasoline costs $3.50 per gallon.
x years
(b) Assuming that Mary plans to keep the car five years and does not believe there will be a trade-in premium associated withthe hybrid model,
determine the net present value of the incremental investment at an eight percent time value of money. (Use a negative sign with your answer.)
$ 0
X
(c) Determine the cost of gasoline required for a payback period of three
$ 0
x per gallon
years.
(d) At $3.50 per gallon, determine the VUE Green combined gas mileage required for a payback period of three years.
0
x miles per gallon
Check
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