Because Nationwide Horizons insurance company will not help pay for punitive damage awards, the directors are concerned whether an award of $20,000,000 would be compensatory, punitive, or some of each. As part of your analysis, you will need to consider the time value of money and use an interest rate for discounting. You remember reading that corporate bond rates are appropriate for discounting workers earnings to present value. Suppose the current rate is 7%. However, you also remember that since the losses are in terms of real dollars, you will need to adjust the interest rate to an approximately real rate by subtracting the inflation rate. As an estimate of the inflation rate, use the median inflation rate implied by the real and nominal prices in Table 1 of the case.

	Sales (Tons)	Average Real Price/Ton ($000)	Nominal Price ($000)	Nominal Revenue ($000)	Mfg. Rep's Commission Rate	Total Cost ($000)	Earnings before Tax ($000)
2001 2h	0	0	0	0	5%	129.840	-129.840
2002 1h	75	2.004	3.253	243.975	5%	251.454	-7.479
2002 2h	100	1.997	3.269	326.903	5%	309.175	17.728
2003 1h	150	2.004	3.315	497.280	5%	425.488	71.792
2003 2h	175	2.004	3.364	588.618	5%	492.402	96.216
2004 1h	185	2.004	3.423	633.271	5%	541.866	91.405
2004 2h	200	2.006	3.482	696.312	5%	605.633	90.680
2005 1h	225	2.001	3.535	795.292	5%	727.298	67.994
2005 2h	275	2.002	3.554	977.303	6%	988.973	-11.670
2006 1h	285	2.003	3.583	1021.067	6%	1042.133	-21.065