How much extra would you be willing to pay for hybrid model

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Reference no: EM131162901

The hybrid model of a car averages 40 mpg as compared to the regular model that gives only 28 mpg. If you drive 20,000 miles per year and the average cost of gas is expected to be $5.00 per gallon over the 5 years that you plan to keep the car, how much extra would you be willing to pay for the hybrid model? Assume that the resale value of the hybrid model would be $500 more at the end of 5 years as compared to the regular model. Assume that the interest rate is 12% per year compounded yearly.

Reference no: EM131162901

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