Question

6 A concept car that will get 100 miles per gallon and carry four persons would have a carbon-fiber and aluminum composite frame with a 900 cc threecylinder turbodiesel/electric hybrid power plant. The extra cost of these technologies is estimated to be $11,000. (a) If gasoline savings over a comparable conventional car would be $900 in year one, increasing by 10% each year, what is the present worth of the savings over a 10-year period at an interest rate of 8% per year

Answer 1

Answer:

$5,027

Explanation:

Saving for the Year = $900

Future Value of Total Saving = 900 + (900 x 1.08^1) + (900 x 1.08^2) + (900 x 1.08^3) + (900 x 1.08^4) + (900 x 1.08^5) + (900 x 1.08^6) + (900 x 1.08^7) + (900 x 1.08^8) + (900 x 1.08^9)

Future Value of Total Saving = $900 + $972 + $1049.76 + $1133.74 + $1224.44 + $1322.40 + $1428.19 + $1542.44 + 1665.84 + $1799.10 = 13037.91

Present value of Total Saving = 13037.91 / (1+0.1)^10

Present value of Total Saving = 5026.68