Replacing half the ferrous metals in current automobiles

Assignment Help Financial Management

Reference no: EM131304638

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 by 55% and fuel consumption by 25%. One impediment to using carbon fibers in cars is cost. 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 if the carbon-fiber car would average 35 miles per gallon of gasoline compared to a conventional car averaging 28 miles per gallon? Assume that gasoline costs $3.50 per gallon, the interest rate is 23% per year, and 118,000 miles are driven uniformly over six years.

Reference no: EM131304638

Questions Cloud

Calculate the value of a call option on the stock : Calculate the value of a call option on the stock with an exercise price of $132.

Developed continuous variable transmission : A large automobile manufacturer has developed a continuous variable transmission (CVT) that provides smooth shifting and enhances fuel efficiency by 2 mpg of gasoline. what is the cost of gasoline (dollars per gallon) that makes this option affordabl..

Future equivalent worth of your social security savings : It is estimated that you will pay about $61,250 into the social security system (FICA) over your 35-year work span. For simplicity, assume this is an annuity of $1,750 per year, starting a year from today with your 31th birthday and continuing throug..

Piece of airport baggage handling equipment : A piece of airport baggage handling equipment can be purchased for $60,000 cash or for $65,000 to be financed over 50 months at 0% interest. This special offer is good for only the next two days. The salesperson states that at least $14,000 can be sa..

Replacing half the ferrous metals in current automobiles : 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 by 55% and fuel cons..

Should new issue be undertaken based on earnings per share : The Hamilton Corporation has 2 million shares of stock outstanding and will report earnings of $6,790,000 in the current year. The company is considering the issuance of 1 million additional shares which can only be issued at $39 per share. Assume th..

What was the firms cash flow to creditors : Cash flow to creditors . the December 31, 2015, balance sheet of Schism, Inc., showedvlong-term debt of $1,410,000, and the December 31,2016 , balance sheet showed long-term debt of $1,551,000. The 2016 income statement showed an interest expence of ..

The opportunity cost of capital for average risk project : Most investments involve a certain level of risk. Risk can affect the return on an asset or a portfolio. Measuring risk will help determine the expected return on an investment. Discuss the concept of risk and how it is measured. Explain how a financ..

The current price of a stock : The current price of a stock is $21. In 1 year, the price will be either $27 or $15. The annual risk-free rate is 6%. Find the price of a call option on the stock that has a strike price is of $25 and that expires in 1 year.

User Account

All Pages