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

Initial investment (2 limos)	$ 1,320,000
Useful life	10 years
Salvage value	$ 130,000
Annual net income generated	$ 121,440
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%.