Lindas Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about...
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Accounting
Lindas Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed investment follows:
Initial investment (2 limos)
$
1,140,000
Useful life
10
years
Salvage value
$
130,000
Annual net income generated
101,460
LLTs cost of capital
14
%
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 14%.
Greater than 14%
Less than 14%
rev: 04_20_2017_QC_
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