Question
3) Assume that Mrs. Cooks real income will not change over the next ten years. Use the mean real income from question 1 to determine
3) Assume that Mrs. Cooks real income will not change over the next ten years. Use the mean real income from question 1 to determine projected real income for the future ten years of Mrs. Cooks work expectancy. Use the regression equation from question 2 to project adjusted price indices for the next ten years. Assume that Mrs. Cook pays 20% of her actual income in taxes and that Green will not provide significant state assistance. Use the projected real income and adjusted price indices to estimate Mrs. Cooks net actual income for the next ten years. What would be the likely amount of an award to Mrs. Cook based on a present value rate of 8%? Discuss the factors that could cause Mrs. Cooks future income to differ from your estimate.
| Number | Year | Gross Income | Price Index |
| 1 | 2004 | 60,056 | 188.9 |
| 2 | 2005 | 61,257 | 195.3 |
| 3 | 2006 | 62,482 | 201.6 |
| 4 | 2007 | 63,732 | 207.3 |
| 5 | 2008 | 65,007 | 215.3 |
| 6 | 2009 | 66,307 | 214.5 |
| 7 | 2010 | 67,633 | 218.1 |
| 8 | 2011 | 68,986 | 224.9 |
| 9 | 2012 | 70,366 | 229.6 |
| 10 | 2013 | 71,773 | 233.0 |
| 11 | 2014 | 73,208 | 236.7 |
| 12 | 2015 | 74,672 | 237.0 |
| 13 | 2016 | 76,165 | 240.0 |
| 14 | 2017 | 77,688 | 245.1 |
| 15 | 2018 | 79,242 | 251.1 |
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Advanced Financial Accounting
Authors: Thomas H. Beechy
5th Edition
0131236997, 9780131236998
