Considering the purchase of two hummer limousines

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Reference no: EM131921076

Linda’s 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 LLT’s cost of capital 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.) 2. Payback period. (Round your answer to 2 decimal places.) 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.) 4. Without making any calculations, determine whether the IRR is more or less than 15%. Greater than 15% Less than 15%

Reference no: EM131921076

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