5. You're trying to decide whether to purchase the hybrid or non-hybrid version of the Toyota...
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5. You're trying to decide whether to purchase the hybrid or non-hybrid version of the Toyota Highlander SUV. The hybrid costs 8,000 more than the non-hybrid but gets 40 mpg as opposed to 25 mpg for the non-hybrid. You drive 4,000 miles per month and will sell the SUV after 4 years. The relevant APR is 6.00%. a. You believe the average price of gas per gallon will be 3.80.What is your monthly gas expense savings with the hybrid? b. The PV of the monthly gas expense savings is how much higher / (lower) than the 8,000 additional cost of the hybrid? c. What average price of gas per gallon would result in a PV of monthly gas expense saving exactly equal to the additional cost of the hybrid? (This is called the "breakeven price of gas"). d. This question builds on your answer to c. What would be the new breakeven price of gas if the hybrid sold for 800 more than the non-hybrid at the end of 4 years? e. This question builds on your answer to d. If by driving a hybrid your monthly insurance. premium was reduced by 4 what would be the new breakeven price of gas? 5. You're trying to decide whether to purchase the hybrid or non-hybrid version of the Toyota Highlander SUV. The hybrid costs 8,000 more than the non-hybrid but gets 40 mpg as opposed to 25 mpg for the non-hybrid. You drive 4,000 miles per month and will sell the SUV after 4 years. The relevant APR is 6.00%. a. You believe the average price of gas per gallon will be 3.80.What is your monthly gas expense savings with the hybrid? b. The PV of the monthly gas expense savings is how much higher / (lower) than the 8,000 additional cost of the hybrid? c. What average price of gas per gallon would result in a PV of monthly gas expense saving exactly equal to the additional cost of the hybrid? (This is called the "breakeven price of gas"). d. This question builds on your answer to c. What would be the new breakeven price of gas if the hybrid sold for 800 more than the non-hybrid at the end of 4 years? e. This question builds on your answer to d. If by driving a hybrid your monthly insurance. premium was reduced by 4 what would be the new breakeven price of gas?
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SOLUTION a To calculate the monthly gas expense savings with the hybrid we need to calculate the difference in gas consumption between the hybrid and nonhybrid and then multiply it by the price of gas ... View the full answer
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Managerial Accounting Tools for business decision making
ISBN: 978-1118096895
6th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Posted Date:
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