Case Study - Evaluating the Purchase of an Asset with Various Capital

- Evaluating the buy of an Asset with Various Capital Budgeting Methods - Case Study Examplend 50 miles per gallon respectively, whereas, the toll and miles per gallon of non-hybrid Toyota Yaris 5-Door LE 2014 is $ 17,644 and 32 respectively (U.S. Department of Energy).The total address of driving the hybrid posture for one year = annual gallons of sack*cost per gallon. Gallons used per year = (12,000/50) = 240 gallons. Therefore, total cost = (240*2.071) = $ 497.04 per year. On the other hand, the total cost of driving the non-hybrid sticker for one year = annual gallons used*cost per gallon. Gallons used per year = (12,000/32) = 375 gallons. Therefore, the total cost = (375*2.071) = $ 776.625 per year. Consequently, the savings offered by the hybrid instance over the non-hybrid model = (776.625 497.04) = $ 279.585 per year (Fuel cost calculator).The NPV of the hybrid model. The annual cash inflow = $ 279.585. The rate of return = 10%. The initial investment = $ 19,905. The NPV = $ -18,187. See appendix 1 (Gotze, Northcott, and Schuster 68-76).Comparatively, the NPV of the hybrid model (-18,187) is lower than the cost of the gasoline locomotive model (17,644). However, from a pure financial standpoint, the hybrid model makes sense since it saves up to $ 279.585 on fuel consumption as compared to non-hybrid model (Gotze, Northcott, and Schuster 68-76).The payback achievement is the time taken to recover the amount invested in a project. Based on this case study, the initial investment = cost of a hybrid model cost of the gasoline locomotive model) = (19,905 - 17,644) = $ 2,261. The expected annual net cash flow = $ 279.585. Therefore, the payback period = (2,261/279.585) = 8.087 years (Gotze, Northcott, and Schuster 68-76).The following are some of the quality concerns related to the hybrid model first, the car bombing loses the charge faster during the cold season, thus increases the number of charging occasions. Second, the hybrid cars weigh less compared to gasoline engine cars. As a result, they easily get involved in accidents, especially during