(Table: Car Costs) the Table Shows the Initial Cost Outlays

Multiple Choice

(Table: Car Costs) The table shows the initial cost outlays of two versions of the Ford Escape and their estimated annual fuel costs. Stu is not sure whether he wants the hybrid or standard model. Although more expensive, the hybrid model has better gas mileage and would save $890 of gas per year. Assume both cars are worthless after six years. At a 7% interest rate, what should Stu do?

A) Buy the hybrid since the net present value of the total cost for the hybrid is less than the standard.
B) Buy the standard since the net present value of the total cost for the standard is less than the hybrid.
C) Buy the standard model since the net present value of the total cost for the standard is more than the hybrid.
D) Buy either model since the net present value of the cost difference between the hybrid and the standard model is zero.