| 1 | A | B | C | D | E | F |
| --- | --- | --- | --- | --- | --- | --- |
| 2 | Royalty rate assessment - The 'Present Value' method of capitalizing flows |  |  |  |  |  |
| 3 | Year --> | 1 | 2 | 3 | 4 | 5 |
| 4 | Sales | 700 | 900 | 1200 | 1600 | 2200 |
| 5 | OPR | 75 | 105 | 130 | 200 | 280 |
| 6 | Royalty | 60 | 36 | 48 | 64 | 88 |
| 7 | Discount Factor,10% | 0.9091 | 0.8264 | 0.7531 | 0.6830 | 0.6209 |
| 8 | Discounted OPR | 68.2 | 86.8 | 97.7 | 136.6 | 173.9 |
| 9 | Discounted R | 54.5 | 29.8 | 36.1 | 43.7 | 54.6 |

Question: What is the 'Present Value' for two years at the 10% rate?
Answer: $0.8264 is the PV for two years at the 10% rate.