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Are you near an Apple Store? If so make an appt. with a Mac Genius and bring it in. Either the hard disk has crashed or a loose connection. The blinking folder means that your iMac can't load the operating system (OS X).

scott.
 
You should boot on your OS X install CD, (put the cd in your mac, then hold C as you press the power button)

From here, first I'd do is go to disk utility and verify/repair your disk.

Doing this will likely tell you if your harddrive has crashed or is corrupt/something is wrong.

If your mac says nothing is wrong, then try "choose start up volume"

from here if your lucky there will be a start up volume named "OS X 10.*" choose that and click "restart"

if your lucky it'll work.

Truthfully i doubt that will work and you'll have to re-install OS X🙁
 
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