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Lindas Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed investment follows: Initial investment (2 limos) $ 1,260,000

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

Initial investment (2 limos) $ 1,260,000
Useful life 10 years
Salvage value $ 130,000
Annual net income generated $ 114,660
LLTs cost of capital 14 %

Assume straight line depreciation method is used.

Required:

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

3. Net present value.

Table or Calculator Function Present Value of $1
Cash Outflow (Beginning of the Year) $(1,260,000)
n = 0
i = 14%
Present Value $(1,260,000)
Table or Calculator Function: Present Value Annuity of $1
Cash Inflow (for Next 10 Years) $227,660
n = 10
i = 14%
Table Factor
Present Value
Table or Calculator Function: Present Value of $1
Cash Inflow (for 10th Year) $130,000
n = 10
i = 14%
Table Factor
Present Value
Total Net Present Value

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