Question

Question 4. (25 marks) Hybrid cars are touted as a "green" alternative; however, the financial aspects of hybrid ownership are not as clear. Consider the 2012 Toyota Earl, which had a list price of $7,140 (including tax consequences) more than the comparable Toyota Eastern. Additionally, the annual ownership costs (other than fuel) for Earl were expected to be $510 more than Eastern. The EPA mileage estimate was 31 mpg for Earl and 22 mpg for Eastern . Assume that gasoline costs $4.15 per gallon and you plan to keep either car for five years. How many miles per year would you need to drive to make the decision to buy Earl worthwhile, ignoring the time value of money? If you drive 16,500 miles per year and keep either car for five years, what price per gallon would make the decision to buy Earl worthwhile, ignoring the time value of money? .

Answer 1

Answer Pagena 34 Break Even point Additional cost $ 140 +SIO X5 = $9690 Costpen Mile for Easteom = 4.15 $0.1886 & 22 cost per Mile for Earl 4.15 = $0.13387 Savings = 0.18864 -0.13387 = $0.05447 Additional Coat Saving & 9690 176.921.67 miles 0.05447 Boreak Everpoint per year) Total Hill 176922 No of years = 35, 384 Miles Pear year Total Miles Driven 82,500 Coßt şavings needed pear Mile 9690 =o.ll 745 por el e 오 $0.11745 6 =$0.117us Р P 0.11445/(1-1) P $ 8.90 S 16,500 X 5 82 Soo