Microsoft Word - EEP101.docx Question 3 You own a 10 year-old Ford pickup truck. The gas mileage of the truck is 10 MPG. You drive this truck 40...

Microsoft Word - EEP101.ps3.S15.docx

Question 3

You own a 10 year-old Ford pickup truck. The gas mileage of the truck is 10 MPG. You drive this truck 40 miles a day, 20 days a month for your commute. The gas price is $3 per gallon (assume that the gas price will not change for 5 years).

(a) What is the energy intensity of the Ford pickup truck?

(b) What is your monthly energy consumption for your commute?

Your roommate gave you a VIP discount coupon for a Toyota Prius. The coupon is only applicable for pickup truck owners, and a pickup owner can exchange his truck for a 5 year-old Prius, and pay $5,000. The market value for your pickup truck is $5,500. Your preference between the Prius and your old pickup truck is indifferent, so you only care about monthly gas expenditure. The gas mileage of the Prius is 50 MPG. You expect that you can use the Prius for 5 years. Your annual discount rate is 0.03.

(d) What is the energy intensity of the Prius?

(e) Will you exchange your pickup truck for the Prius?

(f) If your discount rate is 0.05, would you still exchange your pickup truck?

You own a 10 year-old Ford pickup truck. The gas mileage of the truck is 10 MPG. You drive this truck 40 miles a day,20 days a month for your commute. The gas price is $3 per gallon (assume that...