A fresh graduate who just started his new job is choosing between two commuting cars of comparable
Question:
A fresh graduate who just started his new job is choosing between two commuting cars of comparable sizes.The first is traditional gasoline car and the second is all-electric car. The anticipated usage of the car is 20,000 km per year. The market value for both cars folllows a Decline Balance Depreciation model.Given the data in table below assuming that paying will be in cash, answer the following at 0% interest rate.
| Gasoline car | All-electic car | |
| Price | $24,000 | $36,000 |
| Consumption | 6.5 litre per 100 km | 12 kWh per 12 km |
| Fuel/Energy price | $0.85 per litre | $0.2 per kWh |
| Deprecition rate | 12% | 10% |
a) If the car model to be sold after 3 years, which car model is more economic??
b) What gas price would justify the gasoline model, over the all-electric model, if the commuter will resell the car after 4 years?
c) How many years of usage will justify buying the all-electric model? (Hint: the answer could be a fraction value).
Expert Answer:
