Linda's Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed investment follows: Initial investment (2) limos) Useful life Salvage value Annual net income generated LLT's cost of capital $ 1,200,000 10 years $ 130,000 $ 108,000 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. 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.) factor(s) from the tables provided.
Linda's Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed investment follows: Initial investment (2) limos) Useful life Salvage value Annual net income generated LLT's cost of capital $ 1,200,000 10 years $ 130,000 $ 108,000 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. 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.) factor(s) from the tables provided.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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With information provided with the photos complete the table in the photo.
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Initial investment (2)
limos)
Useful life
Salvage value
Annual net income.
generated
LLT's cost of capital
Saved
$ 1,200,000
10 years
$ 130,000
$ 108,000
Required 1. Required 2
+
Linda's Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information
about the proposed investment follows:
14
Assume straight line depreciation method is used.
Required:
Help LLT evaluate this project by calculating each of the following:
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Required 3 Required 4
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 factor(s) from the tables provided.
4. Without making any calculations, determine whether the IRR is more or less than 14%.
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4 of 6 #
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Calculate net present value.
Note: Cash Outflows and negative amounts should be indicated by a minus sign. Round your "Present Value
whole dollar amount.
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Transcribed Image Text:W
Kequired
Kequired <
Calculate net present value.
Note: Cash Outflows and negative amounts should be indicated by a minus sign. Rour
whole dollar amount.
Table or Calculator Function:
Cash Outflow (Beginning of the Year)
Present Value
Table or Calculator Function:
Cash Inflow (for Next 10 Years)
Required S
Table Factor
Present Value
Table or Calculator Function:
Cash Inflow (for 10th Year)
Table Factor
Present Value
Total Net Present Value
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Required 4
i=
Present Value of $1
Present Value Annuity of $1
Present Value of $1
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