What is internal rate of return on incremental investment

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Are you thinking bypassing a gasoline fueled car in favor of a hybrid (gasoline and electric) automobile? Let's take a look at the relative economics of your possible choice. The gasolinefueled car sells for $20,000 and gets 25 miles per gallon (mpg) of fuel. The alternative hybrid vehicle sells for $25,000 and averages 46 mpg. The resale value of the hybrid car is $2,000 more than that of the gasoline-only car after five years of anticipated ownership. If you drive 15,000 miles per year and gasoline costs $4.00 per gallon, what is the internal rate of return on the incremental investment in the hybrid automobile?

Reference no: EM13212247

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