Motorist pay for a fuel-efficient six-speed transmission

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A new six-speed automatic transmission for automobiles offers an estimated 3% improvement in fuel economy compared to traditional four speed transmissions in front-wheel drive cars. If a four-speed transmission car averages 31 miles per gallon and gasoline costs $4.00 per gallon, how much extra can a motorist pay for a fuel-efficient six-speed transmission? Assume that the car will be driven for 106,000 miles over its lifetime of 15 years. The motorist can earn up to 7% per year on investments. Assume miles driven each year are roughly constant.

Reference no: EM13739969

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