Lindas Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed investment follows:

Initial investment (2 limos)	$ 1,080,000
Useful life	10 years
Salvage value	$ 120,000
Annual net income generated	$ 95,040
LLTs cost of capital	15

Assume straight line depreciation method is used.

Required:

Help LLT evaluate this project by calculating each of the following:

Accounting rate of return.

Payback period.

Net present value. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.)

Note: Use appropriate factor(s) from the tables provided.

Without making any calculations, determine whether the IRR is more or less than 15%.

1.Account rate of return____ %

2. Payback period ______ years

3.

Calculate net present value. Note: Cash Outflows and negative amounts should be indicated by a minus sign. Round your "Present Values" to the nearest whole dollar amount

4. Without making any calculations, determine whether the IRR is more or less than 15%.

IRR _____