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Ivanhoe Company signs a contract to sell the use of its patented manufacturing technology to Bridgeport...

Ivanhoe Company signs a contract to sell the use of its patented manufacturing technology to Bridgeport Corp. for 16 years. The contract for this transaction stipulates that Bridgeport Corp. pays Ivanhoe $19,500 at the end of each year for the use of this technology. Using a discount rate of 9%, what is the value in use of the patented manufacturing technology? (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answer to 2 decimal places, e.g. 5,275.25.)

Value in use $ __________

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Answer #1

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=19500*[1-(1.09)^-16]/0.09

=19500*8.31256

=$162094.92(Approx)

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