Calculate the npv of the hybrid model

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Reference no: EM13936291

Capital Budgeting Project

In this Capital Budgeting Activity, you will be evaluating whether you should purchase a hybrid car or its gasoline-engine counterpart. Select two car models that are similar, with one being a hybrid model and one being the non-hybrid model. (For example, the Honda Civic is available as a hybrid or a gasoline-engine model.) Assume that you plan on keeping your car for 10 years and that at the end of the 10 year, the resale value of both models will be negligible. Use the Federal Reserve Bank Prime Loan rate for your discount interest rate.
Take Screen Shots of all the sources of information used and include in the project file.

You must summit backup of all sources (NOT website links) and show ALL calculations in good form (DO NOT USE EXCEL FORMULAS).
Required:

1. Research the cost of each model (include estimated taxes and title costs). Also, obtain an estimate of the miles-per-gallon fuel efficiency of each model.

2. Estimate the number of miles you drive each year. Also estimate the costs of a gallon of fuel.

3. Given your previous estimate from 1 and 2, estimate the total cost of driving the hybrid model for one year. Also estimate the total cost of driving the non-hybrid model for one year. Calculate the savings offered by the hybrid model over the non-hybrid model.

4. Calculate the NPV of the hybrid model, using the annual fuel savings as the annual cash inflow for the 10 years you would own the car.

5. Compare the NPV of the hybrid model with cost of the cost of the gasoline-engine model. Which model has the lowest (the lowest NPV)? From a financial standpoint, does the hybrid model make sense?

6. Now look at the payback period of the hybrid model. Use the difference between the cost of the hybrid model and the gasoline-engine model as the investment. Use the annual fuel savings as the expected annual net cash inflow. Ignoring the time value of money, how long does it take for the additional cost of the hybrid model to pay for itself through fuel savings?

7. What qualitative factors might affect your decision about which model to purchase?

Verified Expert

This assignment is based on the macroeconomics. In this work of macroeconomics, we have to evaluate the Capital Budgeting Project, in which we have to compare the two project model i.e. Hybrid model and non-hybrid model., on the basis of NPV and Payback.

Reference no: EM13936291

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Reviews

inf936291

8/11/2017 6:24:34 AM

Dear CustomerCare/Expert, Really welcome the exertion, whatever I can state is truly effective and take into account our necessities!! Praise!! Certainly I'll be back :p

inf936291

8/11/2017 6:24:17 AM

I would like to see this project to have a better idea of what expected. Do you provide the whole project completed or just the answers? Is it plagiarism free? How do you incorporate the attached table with what you provided me? It pertains to question 4 and NPV. 24406144_1Exhibit 12-10.pdf I need to complete this as soon as possible. What is the turnaround time for this?

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