Find the breakeven cost of gasoline

Assignment Help Finance Basics
Reference no: EM131977669

Question: Gas-electric (so-called hybrid) vehicles save on gasoline consumption by shutting off the vehicle's engine while idling, giving the vehicle a boost of electric power during acceleration, and capturing electrical energy while braking. In addition to environmental benefits, the primary monetary benefit to the owner is reduced fuel cost as a result of improved gas mileage. The trade-off, however, is that the purchase price of the hybrid vehicle is higher than that of a standard gasoline-only fueled vehicle.

Consider a hybrid vehicle with a sticker price of BD31,500. This vehicle will average 30 miles per gallon of gasoline. A tax credit of BD1,500 for the hybrid vehicle effectively reduces its sticker price of BD30,000. A comparably equipped gasoline-only vehicle will cost BD28,000 and will average 25 miles per gallon of gasoline. Assuming an interest rate of 3% per year and a study period of five years, find the breakeven cost of gasoline (BD/gal) if the vehicle will be driven 18,000 miles each year.

Reference no: EM131977669

Questions Cloud

Estimate the firm cost of equity capital : Gator Enterprises is doing its annual review of its cost of capital. The firm relies on the CAPM to estimate its cost of equity.
Calculate the apv of the project : Using the adjusted present value method, calculate the APV of the project. (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.
What is the effective interest rate of each loan : What is the effective interest rate of each loan?
What is the present value of liability : If the relevant discount rate is 9 percent, what is the present value of this liability?
Find the breakeven cost of gasoline : Assuming an interest rate of 3% per year and a study period of five years, find the breakeven cost of gasoline (BD/gal) if the vehicle will be driven 18,000.
Should the proposed discount be offered : Gardner Company currently makes all sales on credit and offers no cash discount. The firm is considering offering a 2% cash discount for payment within 15 days.
You paying in total interest over the life of the loan : If you repay the loan in 21 years how much are you paying in total interest over the life of the loan?
What is fair interest rate on moore corporation bond : You are considering an investment in 20-year bonds issued by Moore Corporation. What is the fair interest rate on Moore Corporation 30-year bonds?
Compare the npv payback periods for the generator : The gas drilling company, North Eastern Star, (which makes decisions based on a discount rate of 10%, is considering the purchase of a natural gas powered.

Reviews

Write a Review

Finance Basics Questions & Answers

  At what price should the bonds sell

Ryngaert Inc. recently issued noncallable bonds that mature in 15 years. They have a par value of $1,000 and an annual coupon of 5.7%. If the current market interest rate is 7.0%, at what price should the bonds sell?

  Examples of global advertising

Why do you think the SMOSH YouTube Channel is so popular amongst teens - Why is a high-tech product more likely to appeal to the same segment

  How much carpet must be remanufactured

If the recycling equipment costs $0.8 million and has no market value at the end of its eighteight-year life, how much carpet must be remanufactured annually.

  Determine the value of the bond

(Bond valuation) Nissan issued 20-year bonds with annual coupon rate 8 percent redeemed at par ($1,000). If the current market price of Nissan bonds is $945.

  The target capital structure for qm industries is 36

1. the target capital structure for qm industries is 36 percent common stock 7 percent preferred stock and 57 percent

  Scales of infant development is a standardized measure

The Mental Development Index (MDI) of the Bayley Scales of Infant Development is a standardized measure used in longitudinal follow-up of high-risk infants.

  Which bond price would change by a larger amount

Consider two bonds, a 10-year premium bond with a coupon rate higher than its required rate of return and a zero coupon bond that pays only a lump sum payment.

  Explain the statements with explanation

If a borrower would like to lower his/her monthly mortgage payments he/she can make a larger initial down payment.

  Compute the book value of each common share

Alex is considering reissuing the 5,000 treasury shares at the present market price of $10 per share. What effect would this action have on the company's debt/equity ratio, book value per outstanding share, and earnings-per-share ratio?

  Discuss different factors that service managers consider

Discuss different factors that service managers consider when setting a firms target capital structure? - Include both - not for profit firms and investor owned firms.

  Define each of the terms in the important new terms section

How do bar graphs, histograms, and frequency polygons differ in construction?-  What type of scaling is appropriate for each?

  Determine the amount of investing cash flows

On January 12, Ferrell Incorporated obtains a permit to start a comedy club, which will operate only on Saturday nights. To prepare the club for the grand.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd