Cash inflow x PVIFA (12%,10) -750,000. I don\'t understand how to calculate this

Question

Cash inflow x PVIFA (12%,10) -750,000. I don't understand how to calculate this please explain?

The complete question is below

A leading producer of fine cast silver

jewelry, is considering the purchase of new casting equipment that will allow it to expand

its product line. The up-front cost of the equipment is $750,000. The company

expects that the equipment will produce steady income throughout its 10-year life.

a. If One Ring requires a 9% return on its investment, what minimum yearly cash

inflow will be necessary for the company to go forward with this project?

b. How would the minimum yearly cash inflow change if the company required a

12% return on its investment?

Explanation / Answer

Upfront cash outflow = 750,000 (point 0)

Period in consideration = 10 years

Return = 9%. Assume the minimum yearly inflow to be x. Value of cash flow at the end of year 1, discounted to its value at 0 = x/(1.09)^1. Similarly calculate for all years till year 10. Now the sum of all cash inflows should be 750,000. Thus x will be 107,215.66

If rate is 12% x wil be 118,516.18

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