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Linda's Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed Investment follows: Initial investment (2 limos) Useful life
Linda's Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed Investment follows: Initial investment (2 limos) Useful life Salvage value Annual net income generated LLT's cost of capital $ 780,eee 10 years $ 180,000 $ 64,740 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. 4. 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. (Round your answer to 1 decimal place.) Accounting Rate of Return 96 Required 1 Required 2 Required 3 Required 4 Calculate payback period. (Round your answer to 2 decimal places.) Payback Period years Required 1 Required 2 Required 3 Required 4 Calculate 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. Cash Outflows and negative amounts should be indicated by a minus sign. Round your "Present Values" to the nearest whole dollar amount.) Show les Table or Calculator Function: Cash Outflow (Beginning of the Year) 96 Present Value Table or Calculator Function: Cash Inflow (for Next 10 Years) n= 96 Table Factor Present Value Table or Calculator Function: Cash Inflow (for 10th Year) = 96 Table Factor Present Value Total Net Present Value Required 1 Required 2 Required 3 Required 4 Without making any calculations, determine whether the IRR is more or less than 15%. IRR
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