A firm is considering an investment in which its cash flow is 1 = $1 (million),

Question:

A firm is considering an investment in which its cash flow is π₁ = $1 (million), π₂ = -$12, π₃ = $20, and t = 0 for all other t. The interest rate is 7%. Use the net present value rule to determine whether the firm should make the investment. Can the firm use the internal rate of return rule to make this decision?

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