Reference no: EM132624147

Question - Automobiles of the future will most likely be manufactured largely with carbon fibers made from recycled plastics, wood pulp, and cellulose. Replacing half the ferrous metals in current automobiles could reduce a vehicle's weight and fuel consumption. The carbon-fiber car would average 31 miles per gallon of gasoline compared to a conventional car averaging 25 miles per gallon. Assume that gasoline costs $4.80 per gallon, the interest rate is 11% per year, and 111,000 miles are driven uniformly over six years (i.e. 111,000 / 6 miles are driven per year). How much is the anticipated fuel savings per year from using a carbon-fiber car instead of a conventional car? If the justification for the extra sticker price of carbon-fiber cars is solely based on fuel savings, how much extra sticker price can be justified over a six-year life span?