For question a, could you please check if my timeline drawn is correct?In addition, why the solution says the cashflow from year1-3 is positive? I think it should be negative since maintenance of equipment is an expenditure as well.

17. Your firm spends $407,000 per year in regular maintenance of its equipment. Due to the economic downturn, the firm considers forgoing these maintenance expenses for the next three years. If it does so, it expects it will need to spend $1.9 million in year 4 replacing failed equipment. a. What is the IRR of the decision to forgo maintenance of the equipment? b. Does the IRR rule work for this decision? IRR rwes does NOT work c. For what costs of capital is forgoing maintenance a good decision? when positive CE precede a. 0= 407,000 1,900, 000 IRR 1 (1+ IRR) (1+ IRR) -> IRR = 23.803% negative ones. b. No, because positive cash flows precede negative ones. 2 c. For all costs of capital > IRR = 23.803% T 3 4