Reference no: EM131493181

You try to evaluate the idea of getting a regular car versus a hybrid car while considering the time value of money. Assume that the initial cost for a regular car would be $20,000, and the annual fuel and maintenance costs are estimated to be $2,000. For a similar hybrid car, the initial cost is $25,000 and the annual fuel and maintenance costs are $1,000. You expect to run the regular car for 15 years and the hybrid car for 12 years. Without considering the salvage value, which car should you buy if you want to have the minimum annual average cost, assuming an 8% cost? (Hint: compute the equivalent annual cost).