A new six speed automatic transmission for automobiles


Question: A new six speed automatic transmission for automobiles offers an estimated 4% improvement in fuel economy compared to traditional four speed transmissions. If a four speed transmission car averages 30 MPG and gasoline costs $3.00 per gallon, how much extra cost can a motorist pay for a fuel efficient six speed transmission? Assume that the car will be driven for 120,000 miles over its lifetime for 10 years. The motorist can earn 6% per year on investments.

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Finance Basics: A new six speed automatic transmission for automobiles
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