Gravina Company is planning to spend $7,500 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 $1,500 a year. Gravina will incur no additional costs except for depreciation. Its income tax rate is 30%. (For parts 3 and 4 of this question use Table 1 and/or Table 2.) 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 2 decimal places.)

Payback period = ___________ years

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

Book rate of return = ? %

3. What is the maximum amount that Gravina Company should invest if it desires to earn an internal rate of return (IRR) of 14%? (Round your final answer to the nearest whole dollar amount.)

Maximum amount = ?

4. What is the minimum annual (pretax) cash revenue required for the project to earn a 14% internal rate of return? (Round your intermediate calculations and final answer to the nearest whole dollar amount.)