Stan Moneymaker has been informed of a major automobile manufacturer's plan to conserve on gasoline consumption through improved engine design. The idea is called "engine displacement," and it works by switching from 8-cylinder operation to 4-cylinder operation at approximately 40 miles per hour. Engine displacement allows enough power to accelerate from a standstill and to climb hills while also permitting the automobile to cruise at speeds over 40 miles per hour with little loss in driving performance. The trade literature studied by Stan makes the claim that the engine displacement option will cost the customer an extra $800 on the automobile's sticker price. This option is expected to save 5 miles per gallon (an average of in-town and highway driving). A regular 8-cylinder engine in the car that Stan is interested in buying gets an average of 20 miles per gallon of gasoline. If Stan drives approximately 1,000 miles per month, how many months of ownership will be required to make this $800 investment pay for itself? Stan's opportunity cost of capital (1) is 0.25% per month, and gasoline costs $2.50 per gallon. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 0.25% per month. Using the table given above and the interpolation method, …... months of ownership will be required to make this $800 investment pay for itself. (Round to one decimal place.)
Stan Moneymaker has been informed of a major automobile manufacturer's plan to conserve on gasoline consumption through improved engine design. The idea is called "engine displacement," and it works by switching from 8-cylinder operation to 4-cylinder operation at approximately 40 miles per hour. Engine displacement allows enough power to accelerate from a standstill and to climb hills while also permitting the automobile to cruise at speeds over 40 miles per hour with little loss in driving performance. The trade literature studied by Stan makes the claim that the engine displacement option will cost the customer an extra $800 on the automobile's sticker price. This option is expected to save 5 miles per gallon (an average of in-town and highway driving). A regular 8-cylinder engine in the car that Stan is interested in buying gets an average of 20 miles per gallon of gasoline. If Stan drives approximately 1,000 miles per month, how many months of ownership will be required to make this $800 investment pay for itself? Stan's opportunity cost of capital (1) is 0.25% per month, and gasoline costs $2.50 per gallon. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 0.25% per month. Using the table given above and the interpolation method, …... months of ownership will be required to make this $800 investment pay for itself. (Round to one decimal place.)
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:Stan Moneymaker has been informed of a major automobile manufacturer's plan to conserve on gasoline consumption through improved engine design. The idea is called "engine
displacement," and it works by switching from 8-cylinder operation to 4-cylinder operation at approximately 40 miles per hour. Engine displacement allows enough power to accelerate
from a standstill and to climb hills while also permitting the automobile to cruise at speeds over 40 miles per hour with little loss in driving performance. The trade literature studied by
Stan makes the claim that the engine displacement option will cost the customer an extra $800 on the automobile's sticker price. This option is expected to save 5 miles per gallon (an
average of in-town and highway driving). A regular 8-cylinder engine in the car that Stan is interested in buying gets an average of 20 miles per gallon of gasoline. If Stan drives
approximately 1,000 miles per month, how many months of ownership will be required to make this $800 investment pay for itself? Stan's opportunity cost of capital (i) is 0.25%
per month, and gasoline costs $2.50 per gallon.
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 0.25% per month.
Using the table given above and the interpolation method,
months of ownership will be required to make this $800 investment pay for itself. (Round to one decimal place.)
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