E$11-4($Algo$)$ Calculating Accounting Rate of Return, Payback Period, Net Present Value, Estimating Internal Rate of Return $[$LO $11-1,11-2,11-3,11-4]$

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

Initial investment $(2$ limos$)$$ $1,620,000$

Useful life$10$ years

Salvage value$ $140,000$

Annual net income generated$ $157,140$

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:

Accounting rate of return.

Payback period.

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.

Without making any calculations, determine whether the IRR is more or less than $15\%.$