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

Initial investment (2 limos)	$ 1,380,000
Useful life	10 years
Salvage value	$ 130,000
Annual net income generated	$ 128,340
LLTs cost of capital	15

Assume straight line depreciation method is used.

Required:

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

1. Accounting rate of return.
2. Payback period.
3. 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.

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

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2
• Required 3
• Required 4

Calculate accounting rate of return. Note: Round your answer to 1 decimal place.

Accounting Rate of Return

4.7selected answer incorrect

%

Calculate payback period. Note: Round your answer to 2 decimal places.

Payback Period

9.96selected answer incorrect

years

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.

Show less

Table or Calculator Function:	not attempted
Cash Outflow (Beginning of the Year)	not attempted
n =	not attempted
i =	not attempted	%
Present Value	$454,465selected answer incorrect
Table or Calculator Function:	not attempted
Cash Inflow (for Next 10 Years)	not attempted
n =	not attempted
i =	not attempted	%
Table Factor	not attempted
Present Value	$31,681selected answer incorrect
Table or Calculator Function:	not attempted
Cash Inflow (for 10th Year)	not attempted
n =	not attempted
i =	not attempted	%
Table Factor	not attempted
Present Value	$31,681selected answer incorrect
Total Net Present Value	$(893,854)selected answer incorrect

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

IRR	not attempted