Karli is shopping for cars and is considering a hybrid version. The hybrid version of...
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Karli is shopping for cars and is considering a hybrid version. The hybrid version of her preferred model costs $5000 more than the standard, but uses less gas. Karli figures that she'll spend $2000 less in gas in the next year if she drives a hybrid. After that, she'll move closer to work. So, for years 2-7, she'll save $900 a year in gas in the hybrid over the regular model. She ignores any savings after 7 years.
Karli knows she can get 8% interest on her money through other investments, so she will only buy the hybrid if it has a postive NPV with a r= 8% .
What is Karli's NPV of the hybrid?
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