Question
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
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: Accounting rate of return. Payback period. 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. Without making any calculations, determine whether the IRR is more or less than 15%.
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