Reference no: EM131044693

Anion, an environmental engineering firm, is trying to be eco-friendly in acquiring an automobile for general office use. It is considering a gasoline-electric hybrid and a gasoline-free all-electric hatchback. The hybrid under consideration is GM's Volt, which will cost $35,000 and have a range of 40 miles on the electric battery and several hundred more miles when the gasoline engineer kicks in. Nissan’s Leaf, on the other hand, is a pure electric that will have a range of only 100 miles, after which its lithium-ion battery will have to be recharged. The Leaf’s relatively limited range creates a psychological effect known as range anxiety. This fact alone has caused the company to lean toward purchasing the Volt, which is assumed to have a salvage value of $15,000 in 5 years. The Leaf could be leased for $349 per month (end-of-month-payments) for 5 years after an initial $1500 down payment for “account activation.” If the consulting company plans to ignore the range anxiety effect in making its decision, which automobile is the better option on the basis of a present worth analysis at an interest rate of 0.75% per month? Assume the operating cost will be the same for both vehicles.