A brilliant young scientist is killed in a plane crash
Question
A brilliant young scientist is killed in a plane crash. It is anticipated that he could have earned $310,000 a
year for the next 30 years. The attorney for the plaintiff’s estate argues that the lost income should be discounted back to the present at 4 percent. The lawyer for the defendant’s insurance company argues for a discount rate of 9 percent.
| What is the difference between the present value of the settlement at 4 percent and 9 percent? Compute each one separately. Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your answers to 2 decimal places.) |
| Present Value | ||
| PV at 4% rate | $ | |
| PV at 9% rate | ||
| Difference | $ |
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