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

Initial investment (2

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Useful life

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Annual not income

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LLT's cost of capital

$ 1,260,000

10 years

5 130,000

$ 114,660

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 factors) from the tables provided.
4. Without making any calculations, determine whether the IRR is more or less than 14%.