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Sounds like you may have a couple of things going wrong but if the #1 cylinder isn't fireing you may as well start there. Could be the spark plug, plug wire or injector. You can swap/replace parts to see if the problem goes away or moves to another cylinder. The '87's are the last year with the crumbling engine wire harness insulation problem. You may very well have a problem with the injector wiring. The IAC can be tested by connecting 12 volts to the middle plug pin and grounding the outer pins one at a time. The valve should click open and closed very quickly as each outer pin is grounded. All of your various problems could be caused by flakey wireing insulation. It has driven alot of 740 owners battey. See: www.bartonharness.com/volvoharnesses.html
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