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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 S1,320,000 10 years S 130,000 121,440 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. (Round your percentage answer to 1 decimal place.) Rate of Return 2. Payback period. (Round your answer to 2 decimal places.) Years 3. Net present value. (Future Value of $1, Present Value of $1, Future Value of $1, Present Value Annuity of $1) (Use appropriate factor(s) Table or Calculator Function: Cash Outflow (Beginning of the Year) Present Value Table or Calculator Function: Cash Inflow (for Next 10 Years) Table Factor Present Value Table or Calculator Function: Cash Inflow (for 10th Year) Table Factor Present Value Total Net Present Value 4. Without making any calculations, determine whether the IRR is more or less than 15%. O Greater than 15% O Less than 15%
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