The hybrid fusion saves fuel for the lifetime of the vehicle in compasion to the non-hybrid version. Hence a used Fusion hybrid sells for a higher price than a non-used hybrid fusion, all else constant. Calculate how much ore a rational buyer would be willing to pay for a new Fusion hybrid compared to a non-hybrid based on the following information:
Discount rate of 3%
Price of gas is $3 for the next 5 years
15,000 miles driven annually
The hbrid sells for $1700 more at the end of 5 years
Discount fuel savings as if the annual total cost is recieved at the end of each year.