Mr. Snow has worked for the Jones Auto Parts Store for 12 years. He started as a
Question:
Mr. Snow has worked for the Jones Auto Parts Store for 12 years. He started as a sales clerk and worked his way up to assistant store manager. He was the assistant store manager for six years before he was fired by the owner after a heated argument. Mr. Snow started working at the store for \(\$ 16,000\) per year. Right before he was promoted to assistant manager, he was earning \(\$ 21,400\). His first year salary as assistant store manager was \(\$ 25,000\), and he was earning \(\$ 33,500\) when he was fired. Mr. Snow was 45 years old at the time he was fired.
In his damages claim, Mr. Snow is seeking \(\$ 2,250,737\) in lost compensation. In the expert report filed on Mr. Snow's behalf, the expert explained his calculation of damages as follows. Mr. Snow's salary grew at an average annual rate of 9.11 percent. This rate was calculated by dividing his final year salary of \(\$ 33,500\) by his first year salary of \(\$ 16,000\). The result showed an increase of 109.375 percent \((\$ 33,500 \div \$ 16,000)=2.09375\). He then divided by 12 years to get an average annual increase of 9.11 percent \((109.375 \div 12)\) \(=9.11\) percent. Next, the expert projected a 9.11 percent salary increase compounded annually for Mr. Snow for the remaining 20 years that he expected to be employed by the Jones Auto Parts Store. He then summed the expected annual salaries to arrive at the alleged damages amount.
You have been hired as an expert witness by Jones Auto Parts Store to provide rebuttal testimony to the expert hired by Mr. Snow. Without regard to the issue of liability in this case, critique the damages estimate of Mr. Snow's expert providing as much reasoning and support for your position as possible.
Step by Step Answer:
Forensic And Investigative Accounting
ISBN: 9780808021438
4th Edition
Authors: Larry Crumbley, Lester E. Heitger, G. Stevenson Smith