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

Initial investment (2 limos)	$	1,800,000
Useful life		10	years
Salvage value	$	140,000
Annual net income generated		180,000
LLTs cost of capital		15	%

Assume straight line depreciation method is used.

1. Accounting rate of return. (Round your percentage answer to 1 decimal place.)

Accounting Rate of Return

%

2. Payback period. (Round your answer to 2 decimal places.)

Payback Period

Years

3. 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. Do not round intermediate calculations. Cash Outflows and negative amounts should be indicated by a minus sign. Round your "Present Values" to the nearest whole dollar amount.)

Table or Calculator Function:
Cash Outflow (Beginning of the 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 15%.

	Less than 15%
	Greater than 15%