hw5_neil_solution

hw5_neil_solution - Homework #5 Environmental Economics Due...

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Unformatted text preview: Homework #5 Environmental Economics Due in class Wednesday 19 May You may work in groups of up to 4 people Part B Compare the base version of the 2010 Honda Fit (automatic transmission) with the base version of the 2009 Toyota Prius. Assume both cars have an expected lifetime of 10 years. The real interest rate is 5 percent and the gas price is $3/gallon. You pay for the car in cash in year zero, and every year you pay for gas at the end of the year. You can see specs of the cars here: http://www.edmunds.com/honda/fit/2010/index.html http://www.edmunds.com/toyota/prius/2009/index.html a) If all you care about is expenditure on gas, how many miles would you need to drive a year to make it worthwhile to purchase the Prius (you can go to the nearest 10 miles)? Assume you drive the car the same number of miles every year You drive x miles per year. This means you need x/mpg gallons of gas per year, which You drive x miles per year....
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hw5_neil_solution - Homework #5 Environmental Economics Due...

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