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Linda’s Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the...

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

Initial investment (2 limos) $ 1,680,000
Useful life 10 years
Salvage value $ 140,000
Annual net income generated 164,640
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.)

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) $1,680,000
n = 0
i = 15 %
Present Value $1,680,000
Table or Calculator Function: Present Value Annuity of $1
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

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