What price per liter would make the decision

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Question - You are considering buying a hybrid car that would cost R80,000 more than your standard sedan. In addition, the annual ownership costs (other than petrol) for the hybrid were expected to be R8,000 more than that for the standard sedan. The petrol consumption estimates are 5.5 liters per 100km for the hybrid and 8 liters per 100km for the standard sedan.

a. Assume that petrol costs R12 per liter and you plan to keep the car for 6 years. How many kilometers per year would you need to drive to make the decision to buy the hybrid worthwhile? (ignoring the time value of money and any ecological considerations).

b. If you drive 14,000 km per year and keep either car for 6 years, what price per liter would make the decision to buy the hybrid worthwhile? (ignore the time value of money).

Reference no: EM132995800

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