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    Discounting Cash Outflows

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    The company is deciding whether to invest in a certain capital investment. The investment requires an initial outlay of $55,000 and annual payments of $12,000 made at the end of the year for five years. The company's discount rate is 14%. What is the present value of cash outflows related to this investment?

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    Solution Preview

    Please see the attached file.

    Since the cash flows are the same over the years (annuity) we can use PVIFA factor to calculate Present Value (PV)
    PVIFA= Present Value Interest Factor for an Annuity
    It can be ...

    Solution Summary

    The solution calculates the present value of cash outflows related to an investment