How many years of usage would justify buying hybrid model

Assignment Help Financial Management

Reference no: EM131985198

Two car models of the same brand are availables for customers in the market. The price for the gasoline model is at $20,000, and the hybrid model is at $24,000 (gasoline+electric). A new buyer is choosing between the two car models. Estimated car usage by the new buyer is 20,000 km per year. The gasoline model has a fuel consumption rate of 6.5 litres per 100 km, while hybrid model has a better fuel consumption of 4.5 liters per 100 km. The market value for both models decreases by 10% per year (Declining balance depreciation). Assuming a constant gasoline price per liter of $0.75 and assuming the buyer will pay in cash, answering the following at 0% interest rate.

a) If the new buyer is going to resell the car after 3 years, which car model is more economic?

b) How many years of usage would justify buying the hybrid model?

c) What gasoline price would justify the hybrid model if the new buyer will resell it after five years?

Reference no: EM131985198

Questions Cloud

What is security equilibrium rate of return : The security's liquidity risk premium is 1.15 percent and maturity risk premium is 1.70 percent. What is the security's equilibrium rate of return?

What was the total amount of dividends received : The stock price rose to $41.05 per share and was then sold at that price. What was the total amount of dividends recieved?

What was the total dollar return : The stock price rose to $44.25 per share and was then sold at that price. What was the total dollar return?

Enter the name and beta for stocks in your portfolio : Enter the name and Beta for stocks in your portfolio (max 5). Determine the stocks that should remain as part of your efficient portfolio.

How many years of usage would justify buying hybrid model : Two car models of the same brand are availables for customers in the market. How many years of usage would justify buying the hybrid model?

Determine the bonds semi-annual coupon payment : A bond with a 1000 face amount pays semiannual coupons at a rate of X% per year. Determine the bonds semi-annual coupon payment.

Coupon bond making annual coupon payments : Find the duration of a 7.6% coupon bond making annual coupon payments if it has three years until maturity and has a yield to maturity of 7.6%.

What is the probability that your return on this asset : What is the probability that your return on this asset will be less than –3.3 percent in a given year?

With the necessary capital injection : With the necessary capital injection of CZK 100 million. CZK and the bank would like interest for 6% for a possible loan?

User Account

All Pages