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A firm considers undertaking an investment project with the following cash flows: initial machine purchase: $20,000; a purchase of raw materials of $1000 in year

A firm considers undertaking an investment project with the following cash flows: initial machine purchase: $20,000; a purchase of raw materials of $1000 in year one; revenue from sales of production of $9,000 in year two and $12,000 in year three. At the end of year three it sells the machine for $3,000. If the cost of external capital is 7%, should the firm undertake this project?

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