A new six-speed automatic transmission for automobiles offers an estimated 4% improvement in fuel economy compared to traditional four speed transmissions in front-wheel drive cars. If a four-speed transmission car averages 30 miles per gallon and gasoline costs $3.50 per gallon, how much extra can a motorist pay for a fuel-efficient six- speed transmission? Assume that the car will be driven for 119,000 miles over its lifetime of 12 years. The motorist can
earn 4% per year on investments. Assume miles driven each year are roughly constant.
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 4% per year.
The motorist can pay for a fuel-efficient six-speed transmission extra