The Gupta Center for Excellence in Government is considering the purchase of new equipment that will cost $1.3 million if purchased today and will generate the following cash disbursements and receipts. Should Gupta pursue the investment if the cost of capital is 8 percent? Why?

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Year 1 2 3 4 Cash Receipts 950,000 925,000 800,000 675,000 Cash Disbursements 500,000 475,000 450,000 430,000 Net Cash Flow 450,000 450,000 350,000 245,000