Hybrid cars are touted as a "green" alternative; however, the financial aspects of hybrid ownership are not as clear. Consider the 2020 Edsel 550h, which had a list price of $5,400 (including tax consequences) more than the comparable gasoline-only Edsel 550. Additionally, the annual ownership costs (other than fuel) for the hybrid were expected to be $350 more than the traditional sedan. The EPA mileage estimate was 29 mpg for the hybrid and 21 mpg for the traditional sedan. a. Assume that gasoline costs $3.20 per gallon and you plan to keep either car for six years. How many miles per year would you need to drive to make the decision to buy the hybrid worthwhile, ignoring the time value of money? (Do not round intermediate calculations and round your answer to nearest whole number, e.g., 32.) b. If you drive 16,000 miles per year and keep either car for six years, what price per gallon would make the decision to buy the hybrid worthwhile, ignoring the time value of money? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. Gasoline costs $3.20 per gallon and you plan to keep either car for six years. How many miles per year would you need to drive to make the decision to buy the hybrid worthwhile? Assume the appropriate 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 the nearest whole number, e.g., 32.)
Hybrid cars are touted as a "green" alternative; however, the financial aspects of hybrid ownership are not as clear. Consider the 2020 Edsel 550h, which had a list price of $5,400 (including tax consequences) more than the comparable gasoline-only Edsel 550. Additionally, the annual ownership costs (other than fuel) for the hybrid were expected to be $350 more than the traditional sedan. The EPA mileage estimate was 29 mpg for the hybrid and 21 mpg for the traditional sedan. a. Assume that gasoline costs $3.20 per gallon and you plan to keep either car for six years. How many miles per year would you need to drive to make the decision to buy the hybrid worthwhile, ignoring the time value of money? (Do not round intermediate calculations and round your answer to nearest whole number, e.g., 32.) b. If you drive 16,000 miles per year and keep either car for six years, what price per gallon would make the decision to buy the hybrid worthwhile, ignoring the time value of money? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. Gasoline costs $3.20 per gallon and you plan to keep either car for six years. How many miles per year would you need to drive to make the decision to buy the hybrid worthwhile? Assume the appropriate 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 the nearest whole number, e.g., 32.)
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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Transcribed Image Text:Hybrid cars are touted as a "green" alternative; however, the financial aspects of hybrid
ownership are not as clear. Consider the 2020 Edsel 550h, which had a list price of
$5,400 (including tax consequences) more than the comparable gasoline-only Edsel
550. Additionally, the annual ownership costs (other than fuel) for the hybrid were
expected to be $350 more than the traditional sedan. The EPA mileage estimate was 29
mpg for the hybrid and 21 mpg for the traditional sedan.
a. Assume that gasoline costs $3.20 per gallon and you plan to keep either car for six
years. How many miles per year would you need to drive to make the decision to buy
the hybrid worthwhile, ignoring the time value of money? (Do not round intermediate
calculations and round your answer to nearest whole number, e.g., 32.)
b. If you drive 16,000 miles per year and keep either car for six years, what price per
gallon would make the decision to buy the hybrid worthwhile, ignoring the time value
of money? (Do not round intermediate calculations and round your answer to 2
decimal places, e.g., 32.16.)
c. Gasoline costs $3.20 per gallon and you plan to keep either car for six years. How
many miles per year would you need to drive to make the decision to buy the hybrid
worthwhile? Assume the appropriate 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 the nearest whole number, e.g., 32.)
d. If you drive 16,000 miles per year and keep either car for six years, what price per
gallon would make the decision to buy the hybrid worthwhile? Assume the
appropriate 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 decimal
places, e.g., 32.16.)
a. Miles per year
b. Price per gallon
c. Miles per year
d. Price per gallon
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