1. Current MSRP of Toyota Prius is $24 200 and the MSRP for Corolla is $16 950. Both cars share the same size and features and the only difference is fuel economy. If you are planning on purchasing one of the two cars and keeping it for 6 years what is the minimum gas price that justifies the premium paid for the Prius?The estimated mpg for Prius is 51/48 and Corolla is 28/37. The gas price currently is $2.5/gallon and you anticipate that it will go up in the future simultaneously with the inflation rate of 2% annually. Your opportunity cost is 7.5% and you will pay for either one of the two cars in cash. Assume that you will drive 15 000 miles a year with a total of 90 000 miles in six years.Calculate the minimum gas price that justifies the premium paid for the Prius assuming that you will drive your car in town.
