What is the price of gasoline for this analysis

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Reference no: EM13148925

You are in the market for a new car and have decided to buy a new compact in the market. There are two models that you are considering. One is with a gasoline engine and the other is a hybrid version, both are comparably equipped. You plan to keep the car for five years. The model with gasoline engine will cost $25,000 and is expected to have annual maintenance expenditures of $500. The resale price at the end of five years is estimated to be $3,000. This model will give you an average of 25 miles per gallon. The hybrid model will cost $35,000 and is expected to have annual maintenance expenditures of $700. The resale price at the end of five years is estimated to be $6,000. This model will give you an average of 42 miles per gallon. If you drive 20,000 miles per year and the price of gasoline for this analysis is assumed to be $4.00 per gallon, which model should you purchase? Assume that the cost of money is 10% per year compounded yearly.

Reference no: EM13148925

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