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Problem 11-3 Effect of discount rate (LO11-3) A brilliant young scientist is killed in a plane crash. It is anticipated that he could have earned
Problem 11-3 Effect of discount rate (LO11-3) A brilliant young scientist is killed in a plane crash. It is anticipated that he could have earned $220,000 a year for the next 25 years. The attorney for the plaintiff's estate argues that the lost income should be discounted back to the present at 5 percent. The lawyer for the defendant's insurance company argues for a discount rate of 13 percent What is the difference between the present value of the settlement at 5 percent and 13 percent? Compute each one separately. Use Appendix 2 for an approximate answer but calculate your final answer using the formula and financial calculator methods (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Present Value PV at 5% rate PV at 13% rate Derence
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