A concept car that will get 100 miles per gallon and carry 4 persons would have

Question

A concept car that will get 100 miles per gallon and carry 4 persons would have a carbon-fiber and aluminum composite frame with a 900 cc three-cylinder turbo diesel/electric hybrid power plant. The extra cost of these technologies is estimated to be $ 11,000. If gasoline savings over a comparable conventional car would be $900 in year 1, 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? Base savings Using the G formula, P:

Explanation / Answer

The savings over the 10 years is not good enough to make up the investment of 11000.

Particulars Year Amount NPV@8% Initial Cost 0 -11000 -11000 Savings (Year 1 to 10) 1 900 833.33 2 990.00 848.77 3 1089.00 864.48 4 1197.90 880.49 5 1317.69 896.80 6 1449.46 913.41 7 1594.40 930.32 8 1753.85 947.55 9 1929.23 965.10 10 2122.15 982.97 Total Savings -1936.79

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