Hybrid cars are touted as a "green" alternative; however, the financial aspects of hybrid ownership are...

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Hybrid cars are touted as a "green" alternative; however, thefinancial aspects of hybrid ownership are not as clear. Considerthe 2014 Edsel 550h, which had a list price of $5,500 (includingtax consequences) more than the comparable Edsel 550. Additionally,the annual ownership costs (other than fuel) for the hybrid wereexpected to be $470 more than the traditional sedan. The EPAmileage estimate was 26 mpg for the hybrid and 18 mpg for thetraditional sedan.
a. Assume that gasoline costs $3.80 per gallon and you plan tokeep either car for six years. How many miles per year would youneed to drive to make the decision to buy the hybrid worthwhile,ignoring the time value of money? (Do not round intermediatecalculations and round your answer to nearest whole number, e.g.,32.) Miles per year: ???
b. If you drive 17,500 miles per year and keep either car forsix years, what price per gallon would make the decision to buy thehybrid worthwhile, ignoring the time value of money? (Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.) Price per gallon $ ??
c. Gasoline costs $3.80 per gallon and you plan to keep eithercar for six years. How many miles per year would you need to driveto make the decision to buy the hybrid worthwhile? Assume theappropriate interest rate is 10 percent and all cash flows occur atthe end of the year. (Do not round intermediate calculations andround your answer to the nearest whole number, e.g., 32.) Miles peryear: ??
d. If you drive 17,500 miles per year and keep either car forsix years, what price per gallon would make the decision to buy thehybrid worthwhile? Assume the appropriate interest rate is 10percent and all cash flows occur at the end of the year. (Do notround intermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.) Price per gallon $??

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3.9 Ratings (516 Votes)

a Let the annual miles be x Thus total costs of hybrid 550064706x2638 and costs of traditional sedan 6x1838 Now cost of hybrid cost of sedan So 550064706x2638 6x1838 Or 8320 08769x 12667x Or 8320 03897x Or x 832003897 2134737 Thus x 21348 miles per year b Let the price per gallon be y So cost of hybrid 5500647061750026y and cost of traditional See Answer

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Hybrid cars are touted as a "green" alternative; however, thefinancial aspects of hybrid ownership are not as clear. Considerthe 2014 Edsel 550h, which had a list price of $5,500 (includingtax consequences) more than the comparable Edsel 550. Additionally,the annual ownership costs (other than fuel) for the hybrid wereexpected to be $470 more than the traditional sedan. The EPAmileage estimate was 26 mpg for the hybrid and 18 mpg for thetraditional sedan.a. Assume that gasoline costs $3.80 per gallon and you plan tokeep either car for six years. How many miles per year would youneed to drive to make the decision to buy the hybrid worthwhile,ignoring the time value of money? (Do not round intermediatecalculations and round your answer to nearest whole number, e.g.,32.) Miles per year: ???b. If you drive 17,500 miles per year and keep either car forsix years, what price per gallon would make the decision to buy thehybrid worthwhile, ignoring the time value of money? (Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.) Price per gallon $ ??c. Gasoline costs $3.80 per gallon and you plan to keep eithercar for six years. How many miles per year would you need to driveto make the decision to buy the hybrid worthwhile? Assume theappropriate interest rate is 10 percent and all cash flows occur atthe end of the year. (Do not round intermediate calculations andround your answer to the nearest whole number, e.g., 32.) Miles peryear: ??d. If you drive 17,500 miles per year and keep either car forsix years, what price per gallon would make the decision to buy thehybrid worthwhile? Assume the appropriate interest rate is 10percent and all cash flows occur at the end of the year. (Do notround intermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.) Price per gallon $??