Business: With gasoline prices at $3.00 per gallon, consumers are flocking to purchase hybrid vehicles (combination of gasoline and electric motors) that get 50 miles per gallon of gasoline. The monthly payment on a three-year lease of a hybrid is $499 compared to $399 per month on a conventional, equivalent traditional gasoline car that gets 25 miles per gallon. Both vehicles require a one-time $1,500 payment for taxes, license, and dealer charges. Both vehicles have identical lease terms for the residual

With gasoline prices at $3.00 per gallon, consumers

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18.03.2022

Answer and Explanation:

The computation is shown below:

a. The number of miles driven per year is

Let us assume the mileage be M

Now

$499 + M ($3 ÷ 50) = $399 + M ($3 ÷ 25)

$100 = M(0.12 - 0.06)

M = $100 ÷ 0.06

= 1,666.66 miles per month

For year, it is

= 1,666.66 × 12

= 20,000 miles per year

c. Now in the case when the gasoline price is $4 per gallon

$499 + M ($4 ÷ 50) = $399 + M ($4 ÷ 25)

$100 = M(0.16 - 0.08)

M = $100 ÷ 0.08

= 1,250 miles per month

For year, it is

= 1,250 × 12

= 15,000 miles per year

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