Question
Problem 11-3 Effect of discount rate [LO3] 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 [LO3] A brilliant young scientist is killed in a plane crash. It is anticipated that he could have earned $300,000 a year for the next 25 years. The attorney for the plaintiffs estate argues that the lost income should be discounted back to the present at 5 percent. The lawyer for the defendants insurance company argues for a discount rate of 10 percent. What is the difference between the present value of the settlement at 5 percent and 10 percent? Compute each one separately. Use Appendix D 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 10% rate Difference $ References WorksheetProblem 11-3 Effect of discount rate [LO3]
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