An allocation system that uses departmental overhead allocation rates is more refined than one that uses a plantwide overhead al
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Answer:
Present value of this stream of payments=97,179.75
Explanation:
The payment stream described is an ordinary annuity, 10 equal payments in equal intervals, with the 1st payment being received at the end of year 10 and the last one at the end of the 20th year.
Present value of an ordinary annuity is calculated as follows:
Where PMT is equal payments made each period
= $20,500
i is the required rate of return per period
= 5%
n is the number of periods= 10
Applying this formula would thus give the present value of the annuity at the end of year 10 as follows:
= 158,295.57
This is the present value at the end of year 10, and this value has to be discounted 10 years back to today as follows:
=97,179.75