Use the Following to Answer Question

question 37

Multiple Choice

Use the following to answer question:
Table 14.3
Year
Costs if Hybrid Bought
Costs if Standard Bought
0
-$27,000
-$22,500
1
-2,000
-2,890
2
-2,000
-2,890
3
-2,000
-2,890
4
-2,000
-2,890
5
-2,000
-2,890
6
-2,000
-2,890
-(Table 14.3) The table shows the initial cost outlays of two versions of the Ford Escape and their estimated annual fuel costs. Stu is not sure whether he wants the hybrid or standard model. Although more expensive, the hybrid model has better gas mileage and would save $890 of gas per year. Assume both cars are worthless after six years. At a 7% interest rate, what is the net present value of the net cost difference between the hybrid and the standard model?

• A) $450.10
• B) -$257.78
• C) -$48.23
• D) $175.96

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