Gravina Company is planning to spend $6,000 for a machine that it will depreciate on a straight-line basis over 10 years with no salvage value. The machine will generate additional cash revenues of $1,200 a year. Gravina will incur no additional costs except for depreciation. Its income tax rate is 35%. (For parts 3 and 4 of this question use Table 1 and Table 2.)

table 1 - Present value of $1

table 2 - Present value of annuity of $1

Required:

1. What is the payback period of the proposed investment under the assumption that the cash inflows occur evenly throughout the year? (Round your answer to 1 decimal places.)

2. What is the accounting (book) rate of return (ARR) based on the initial investment outlay? (Round your answer to 1 decimal place.)

3. What is the maximum amount that Gravina Company should invest if it desires to earn an internal rate of return (IRR) of 15%? (Round your final answer to the nearest whole dollar amount.)

4. What is the minimum annual (pretax) cash revenue required for the project to earn a 15% internal rate of return? (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

1.	Payback period		years
2.	Book rate of return		%
3.	Maximum amount
4.	Minimum annual (pretax)