In this Activity, you will be evaluating whether you should purchase a hybrid car or its gasoline-engine counterpart. Select two car models that are similar, with one being a hybrid model and one being the non-hybrid model - Case Study Example

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Two cars falling under the same brand will be selected to facilitate the assessment. However, one car will be a hybrid with the other being a non-hybrid type…
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In this Activity, you will be evaluating whether you should purchase a hybrid car or its gasoline-engine counterpart. Select two car models that are similar, with one being a hybrid model and one being the non-hybrid model
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"In this Activity, you will be evaluating whether you should purchase a hybrid car or its gasoline-engine counterpart. Select two car models that are similar, with one being a hybrid model and one being the non-hybrid model"

Download file to see previous pages On the other hand, the retail base price and the Mpg for the non-hybrid counterpart is $ 21,275 and 39 respectively (Car and Driver, 2015).
The annual cost of driving a Hybrid Honda Civic EX = annual gallon of gasoline*price per gallon. Gallons used annually = (12,000/44) = 272.73 gallons. Therefore, the total cost = (272.73*2.433) = $ 663.55 annually. On the other hand, the aggregate cost of driving the non-hybrid model = annual gallons * cost per gallon. Annual gallons consumption rate = (12,000/39) = 307.69. Therefore, the total cost = (307.69*2.433) = $ 748.61 annually. Based on the cost estimations, the savings offered by the hybrid model over the non-hybrid model = (748.61 – 663.55) = $ 85.06.
The net present value (NPV) of the hybrid model assuming a rate of return of 10% is determined. The annual cash inflow = $ 85.06. The original investment = (26,925 – 21,275) = $ 5,127. Therefore, the NPV = $ - 4,604. See appendix 1 (Needles, Powers & Crosson, 2011).
Based on the analysis, the NPV of the hybrid model = $ - 4,604, which lower than the cost of gasoline counterpart ($ 21,275). The investment does not create value for the investors but does save costs related fuel consumption as has been determined above ($ 85.06) annually.
The payback period is how long it takes to recover the initial investment completely. Based on the analysis, the original investment = (cost of the hybrid car – the cost of the gasoline counterpart) = (26,402 – 21,275) = $ 5,127. The anticipated annual net cash flows have been determined as $ 85.06. Therefore, the payback period = (5,127/85.06) = 60.28 years (Needles, Powers & Crosson, 2011).
The following are some of the quality factors that influence a buyers decision: first, hybrid cars have less power as compared to their gasoline counterpart. The amount of load that the model can carry is limited. Second, the battery is sensitive to temperature. In cold weather, its ability to store ...Download file to see next pagesRead More
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