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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) $ 1,080,000
Lindas Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed investment follows:
Initial investment (2 limos) | $ | 1,080,000 | |
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: |
1. | Accounting rate of return. |
2. | Payback period. (Round your answer to 2 decimal places.) |
3. | Net present value. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round your "Present Values" to the nearest whole dollar amount.) |
Table or Calculator Function: | |
Cash Outflow (beginning of year) |
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n= |
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i= |
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Present Value |
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Table or Calculator Function: | Present Value Annuity of $1 |
Cash Inflow (for next 10 year) |
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n= |
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i= |
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Table Factor |
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Present Value |
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Cash Inflow (for 10th year) |
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n= |
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i= |
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Table Factor |
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Present Value |
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Total Net Present Value |
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