Calculating the size of settlement amount
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You are serving on a jury. A plaintiff is suing the city for injuries sustained after falling down an uncovered manhole. In the trial, the doctor testified that it will be 5 years before the plaintiff is able to return to work. The jury has already decided in favor of the plaintiff. You are the foreman of the jury and propose that the jury gives the plaintiff an award to cover the following items:
a) The present value of 2 years of back-pay ($34,000 and $36,000).
b) The present value of 5 years of future salary. Assume that the salary would increase at a rate of 3 percent a year.
c) $100,000 for pain and suffering
d) $20,000 for court costs
e) Assume an interest rate of 7%. What should be the size of the settlement?
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Solution Summary
Solution depicts the steps to calculate the settlement amount in the given case.
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a) The present value of 2 years of back-pay ($34,000 and $36,000).
I assume that salary of $34000 was due one year ago and a salary of $36000 is due today. Then
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- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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