Assume straight line depreciation method is used. 2.Payback period. (Round your
ID: 2482876 • Letter: A
Question
Assume straight line depreciation method is used.
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. Round your "Present Values" to the nearest whole dollar amount.)
Linda’s Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed investment follows:Explanation / Answer
1 Accounting rate of retung Average return/Investment 157140/1620000 = 9.70% Pay Back Period Year Cash flow Cummulative Year 0 -1620000 -1,620,000 Year 1 305,140 -1,314,860 Year 2 305,140 -1,009,720 Year 3 305,140 -704,580 Year 4 305,140 -399,440 Year 5 305,140 -94,300 Year 6 305,140 210,840 Year 7 305,140 515,980 Year 8 305,140 821,120 Year 9 305,140 1,126,260 Year 10 445,140 1,571,400 Total NPV Pay Back Period is 5+(94300/305140) = 5.31 Years Year Cash flow NPV Year 0 -1620000 -1,620,000 Year 1 305140 265,339 Year 2 305140 230,730 Year 3 305140 200,635 Year 4 305140 174,465 Year 5 305140 151,709 Year 6 305140 131,920 Year 7 305140 114,713 Year 8 305140 99,751 Year 9 305140 86,740 Year 10 445140 110,032 Total NPV -53,967 Formula for NPV= Present cash inflow*(1+% of return)^-t Depriciation (1620000-140000)/10 148000 yearly Cash Flow 157140+148000 = 305140 year 10 Salvage value added
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