Question 7 Your company is evaluating whether it should invest in a $500,000 machine. With the new machine your firm projects it will be able to generate $100,000 cash inflows at the end of every year for the next 7 years. At the end of the 7 years, your company will scrap the machine and do not expect to receive any salvage value for it. The cost of capital for your firm is 12%. Calculate the internal rate of return (IRR) of this investment. Should your firm purchase the machine? Explain your reason(s).

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