Year | Amount of future payment * discount rate 8-percent present value factor = present value |
1981 | $2,000 * 0.6805 = $1,361 |
1982 | 2,000 * .6301 = 1,260 |
1983 | 2,000 * .5834 = 1,167 |
1984 | 2,000 * .5402 = 1,080 |
1985 | 2,000 * .5002 = 1,000 |
Assignable cost for 1976 | 5,868 |
Assignable cost1 | |
Year of required service: | |
1977 | $2,000 |
1978 | 2,000 |
Total amount of award | 4,000 |
1 Note that this illustration assumes that the facts and circumstances of the award indicate that the award relates equally to each period of future service. Thus, the assignable cost was allocated on a pro-rata basis.
Year1 | Amount of future payment | Present value factor2 treasury rate3 | Assignable cost for each year | ||
1 | $1,000 | * | 0.8573 (8 pct for 2 yr) | = | $857.30 |
2 | 1,000 | * | 0.9302 (7.5 pct for 1 yr) | = | 930.20 |
3 | 1,000 | * | 1.000 (8 pct for 0 yr) | = | 1,000.00 |
1 Note that in accordance with the facts and circumstances of the award no deferred compensation is assignable to the period in which the award is made and that the award relates equally to each period of future service.
2 Note that since the costs are measured at the end of each year of required service, the present value factors are based on the number of years from the year of assignment to the date of payment.
3 Note that the prevailing Treasury rate changed from year 1 to year 2.
Amount of future payment * Discount rate present value factor for 2 yr at 8 pct = Assignable cost
$2,000 * 0.8573 = $1,714.60
Assignable cost * Discount rate future value for 1 yr at 8 pct = Forfeiture
$1,714.60 * 1.08 = $1,851.77
48 C.F.R. §§9904.415-60