For an investment in a hybrid auto like the Toyota Prius, the car owner typically pays a higher initial price for the car but enjoys lower fuel costs for the life of the vehicle. The authors note that consumers tend to use discount rates that are too high when computing the net present value of these investment decisions. If this is true, consumers would tend to place too ________ emphasis on the initial purchase price and too ________ emphasis on the future fuel savings when computing the net present value of the investment.

Question

Quizplus · Accepted Answer

The statement suggests that consumers tend to overvalue the initial purchase price (placing too much emphasis on it) and undervalue the future fuel savings (placing too little emphasis on it).

For an Investment in a Hybrid Auto Like the Toyota