Are you thinking of bypassing a gasolinefueled car in favor of a hybrid (gasoline and electric) automobile? Let's take a look at the relative economics of your possible choice. The gasoline-fueled car sells for ?$19,000 and gets 25 miles per gallon (mpg) of fuel.
The alternative hybrid vehicle sells for $25,000 and averages 69.8 mpg. The resale value of the hybrid car is ?$1,500 more than that of the gasoline-only car after five years of anticipated ownership.
If you drive 14,000 miles per year and gasoline costs $4.00 per gallon, what is the internal rate of return on the incremental investment in the hybrid automobile?