It is now December 31, 2015 (t = 0), and a jury just found in favor...

80.2K

Verified Solution

Question

Finance

It is now December 31, 2015 (t = 0), and a jury just found infavor of a woman who sued the city for injuries sustained in aJanuary 2014 accident. She requested recovery of lost wages plus$600,000 for pain and suffering plus $120,000 for legal expenses.Her doctor testified that she has been unable to work since theaccident and that she will not be able to work in the future. Sheis now 62, and the jury decided that she would have worked foranother three years. She was scheduled to have earned $37,000 in2014. (To simplify this problem, assume that the entire annualsalary amount would have been received on December 31, 2014.) Heremployer testified that she probably would have received raises of3% per year. The actual payment for the jury award will be made onDecember 31, 2016. The judge stipulated that all dollar amounts areto be adjusted to a present value basis on December 31, 2016, usinga 8% annual interest rate and using compound, not simple, interest.Furthermore, he stipulated that the pain and suffering and legalexpenses should be based on a December, 31, 2015, date. How large acheck must the city write on December 31, 2016? Do not roundintermediate calculations. Round your answer to the nearestcent.

Answer & Explanation Solved by verified expert

3.6 Ratings (688 Votes)

There are three types of payments that City will have to pay to the appellant 1 Lost Wages 2 Pain and Suffering expenses 3 Legal expenses Since actual payment will have to be made on December 31 2016 value of all the above expenses have to be calculated as on 31st See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

It is now December 31, 2015 (t = 0), and a jury just found infavor of a woman who sued the city for injuries sustained in aJanuary 2014 accident. She requested recovery of lost wages plus$600,000 for pain and suffering plus $120,000 for legal expenses.Her doctor testified that she has been unable to work since theaccident and that she will not be able to work in the future. Sheis now 62, and the jury decided that she would have worked foranother three years. She was scheduled to have earned $37,000 in2014. (To simplify this problem, assume that the entire annualsalary amount would have been received on December 31, 2014.) Heremployer testified that she probably would have received raises of3% per year. The actual payment for the jury award will be made onDecember 31, 2016. The judge stipulated that all dollar amounts areto be adjusted to a present value basis on December 31, 2016, usinga 8% annual interest rate and using compound, not simple, interest.Furthermore, he stipulated that the pain and suffering and legalexpenses should be based on a December, 31, 2015, date. How large acheck must the city write on December 31, 2016? Do not roundintermediate calculations. Round your answer to the nearestcent.