Determine the initial yearly income that could be provided

Reference no: EM13617716

Tod Lohman has filed a lawsuit against the party alleged to be at fault in an accident resulting in his total disability. You have been hired to provide expert testimony during the damage phase of the trial concerning the present value of Mr. Lohman's lost earning power. At the time of the accident, Mr. Lohman was earning a yearly salary of $140,000. Work expectancy tables provided by the Bureau of Labor Statistics show that Mr. Lohman would have been expected to work another 25 years before retiring. The demand for specialists with Mr. Lohman's training and work history indicate that a combination of job performance and cost of living adjustments would have permitted his earnings to increase by roughly 5.8 percent per year throughout his career. Southwestern Mutual Life's actuarial tables indicate that Mr. Lohman has a current life expectancy of 40 years. Assuming that prices are expected to increase steadily at 4.0 percent per year over the next 40 years and that the money from any damage award can be invested at 11 percent per year.

a. Determine the economic (present) value of Mr. Lohman's lost earnings.

b. Determine the initial yearly income that could be provided from a damage award equal to the amount in part (a) assuming that Mr. Lohman would want the purchasing power of his yearly income to remain constant for his remaining lifetime.

Reference no: EM13617716

Questions Cloud

Organic chicken company has a debt-equity ratio of 065 : organic chicken company has a debt-equity ratio of 0.65. return on assets of 8.5 percent and total equity is 540000.

If a cell phone company conducted a telemarketing campaign : if a cell phone company conducted a telemarketing campaign to generate new clients and the probability of successfully

If the investor invests 1000 in a 2000 in b 3000 in c and : if the investor invests 1000 in a 2000 in b 3000 in c and 4000 in d. what is the return of this portfolio in each state

A random sample of 100 computer chips made by a : a random sample of 100 computer chips made by a manufacturer were inspected and 8 were found to be defective.a

Determine the initial yearly income that could be provided : tod lohman has filed a lawsuit against the party alleged to be at fault in an accident resulting in his total

A vending macine dispenses coffee into a twelve-ounce cup : a vending macine dispenses coffee into a twelve-ounce cup. the amount of coffee dispensed into the cup is normally

Seventy percent of houshold say the would feel secure if : seventy percent of houshold say the would feel secure if they had 50000 in saving. you randomly select 8 houshold and

Fred is the owner of a local feed store which one of the : fred is the owner of a local feed store. which one of the following ratios should he compute if he wants to know how

On september 1 2013 thomas doniphon purchased a us : on september 1 2013 thomas doniphon purchased a u.s. government bond having a coupon rate of 4.5 percent a par value of

User Account

All Pages