Two car models of the same brand are availables for customers in the market. The price for the gasoline model is at $20,000, and the hybrid model is at $24,000 (gasoline+electric). A new buyer is choosing between the two car models. Estimated car usage by the new buyer is 20,000 km per year. The gasoline model has a fuel consumption rate of 6.5 litres per 100 km, while hybrid model has a better fuel consumption of 4.5 liters per 100 km. The market value for both models decreases by 10% per year (Declining balance depreciation). Assuming a constant gasoline price per liter of $0.75 and assuming the buyer will pay in cash, answering the following at 0% interest rate.
a) If the new buyer is going to resell the car after 3 years, which car model is more economic?
b) How many years of usage would justify buying the hybrid model?
c) What gasoline price would justify the hybrid model if the new buyer will resell it after five years?