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

Initial investment (2 limos)	$	960,000
Useful life		10	years
Salvage value	$	120,000
Annual net income generated	$	82,560
LLTs cost of capital		13	%

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. (Complete Table)

Table or calculator function
Cash outflow (beginning of year)
n=
i=		%
Present Value
Table or calculator function
Cash Inflow (for next 10 years)
n=
i=		%
Table Factor
Present Value
Table or calculator function
Cash Inflow (for 10th year)
n=
i=		%
Table Factor
Present Value
Total Net present Value

4. Without making any calculations, determine whether the IRR is more or less than 13%.

= ?