Linda's Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed investment follows: Initial investment (2 limos) $ 840,000 Useful life 10 years Salvage value Annual net income generated LLT's cost of capital $ 120,000 70,560 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. 4. Without making any calculations, determine whether the IRR is more or less than 14%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Calculate accounting rate of return. (Round your answer to 1 decimal place.) Accounting Rate of Return

Linda's Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed investment follows: Initial investment (2 limos) $ 840,000 Useful life 10 years Salvage value Annual net income generated LLT's cost of capital $ 120,000 70,560 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. 4. Without making any calculations, determine whether the IRR is more or less than 14%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Calculate accounting rate of return. (Round your answer to 1 decimal place.) Accounting Rate of Return

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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