The owner of an alcohol car is concerned about government policy with regard to fuel prices. It is estimated that gasoline will rise by 3% per year and ethanol by 5% per year in real terms. The current cost of gasoline is $3.00 per liter. The average consumption of your car is 9 km/liter and it runs around 20,000 km/month. Assuming a minimum active rate of return of 10% per year in real terms, compare for a 4-year horizon the equivalent annual cost of consumption of your car and a gasoline car, with the consumption of the alcohol car being 20% higher, and the price of a liter of alcohol today corresponds to 80% of the price of a liter of gasoline.
The owner of an alcohol car is concerned about government policy with regard to fuel prices. It is estimated that gasoline will rise by 3% per year and ethanol by 5% per year in real terms. The current cost of gasoline is $3.00 per liter. The average consumption of your car is 9 km/liter and it runs around 20,000 km/month. Assuming a minimum active rate of return of 10% per year in real terms, compare for a 4-year horizon the equivalent annual cost of consumption of your car and a gasoline car, with the consumption of the alcohol car being 20% higher, and the price of a liter of alcohol today corresponds to 80% of the price of a liter of gasoline.
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter11: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 8P: The Rodriguez Company is considering an average-risk investment in a mineral water spring project...
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The owner of an alcohol car is concerned about government policy with regard to fuel prices. It is estimated that gasoline will rise by 3% per year and ethanol by 5% per year in real terms. The current cost of gasoline is $3.00 per liter. The average consumption of your car is 9 km/liter and it runs around 20,000 km/month. Assuming a minimum active
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