2-23. Ethanol blended with gasoline can be used to
power a “flex-fueled” car. One particular blend that is
gaining in popularity is E85, which is 85% ethanol and
15% gasoline. E85 is 80% cleaner burning than gasoline
alone, and it reduces our dependency on foreign oil. But
a flex-fueled car costs $1,000 more than a conventional
gasoline-fueled car. Additionally, E85 fuel gets 10% less
miles per gallon than a conventional automobile.
Consider a 100% gasoline-fueled car that averages
30 miles per gallon. The E85-fueled car will average
about 27 miles per gallon. If either car will be driven
81,000 miles before being traded in, how much will
the E85 fuel have to cost (per gallon) to make the flexfueled
car as economically attractive as a conventional
gasoline-fueled car? Gasoline costs $2.89 per gallon.
Work this problem without considering the time value
of money. (2.1)