Streaky Bay Ltd is involved in research and development. For the year ended 30 June 2018, research and development on Project X is incurred as follows:

Research $185,000

Development $300,000.

Project X is expected to return profits of $250 000 over the next four years (with about 62 500 expected to be recognised each year), starting from 1 July 2018. Streaky Bay uses a discount rate of 8 percent.

The amount expected to be recouped is 207,006. I do not understand how this figure was reached.

Please explain step by step.

Thank you