Q3 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 Do your calculations for question 3 in the following order 1 Use mean real income from question 1 to determine projected real income for 2019 2028 (Mean 31, 104 12 from Q1) 2 Use regression equation from question 2 to determine projected adjusted price indices ( y 23 699x 1958 3 from Q2) R 2 0 9799 3 Use projected real income, adjusted price indices, and tax to estimate Mrs Cook's net actual income for 2019 2028 4 Determine the present value of the future net cash flow Number 1 2 3 Year 2004 2005 Sample Varianc Sample Deviati Mean Median 227951 0084 477 4421519 $31,104 12 $30,993 06 2006 4 2007 2008 5 2009 6 7 Gross Income $60,056 00 $61,257 00 $62,482 00 $63,732 00 $65,007 00 $66,307 00 $67,633 00 $68,986 00 $70,366 00 $71,773 00 $73,208 00 $74,672 00 $76,165 00 $77,688 00 $79,242 00 Price Index 188 9 195 3 201 6 207 3 215 3 214 5 218 1 224 9 229 6 233 236 7 237 240 245 1 251 1 Adjusted Price Index 1 889 1 953 2 016 2 073 2 153 2 145 2 181 2 249 2 296 2 33 2 367 2 37 2 4 2 451 2 511 2010 2011 2012 2013 2014 2015 2016 2017 2018 Real Income $31,792 48 $31,365 59 $30,993 06 $30,743 85 $30,193 68 $30,912 35 $31,010 09 $30,674 08 $30,647 21 $30,803 86 $30,928 60 $31,507 17 $31,735 42 $31,696 45 $31,557 95 8 9 10 11 12 13 14 15 SUMMARY OUTPUT Regression Statistics Multiple R 0 98987728 R Square 0 97985702 Adjusted R Square 0 97830757 Standard Error 0 65867192 Observations 15 ANOVA df F Significance F 632 386291 2 08E 12 1 Regression Residual Total SS 274 359967 5 64003303 280 MS 274 359967 0 43384869 13 14 Year Adjusted Price Index Coefficients Standard Error 1958 25615 2 10428052 23 6987101 0 94239611 t Stat 930 606034 25 1472919 P value 9 62E 33 2 08E 12 Lower 95 1953 71013 21 6627871 Upper 95 1962 80217 25 7346331

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Q3. Assume that Mrs. Cooks real income will not change over the next ten years. Use the mean real income from question 1 to determine

Q3. 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.

Do your calculations for question 3 in the following order:

1. Use mean real income from question 1 to determine projected real income for 2019 - 2028.

(Mean = 31, 104.12 from Q1)

2. Use regression equation from question 2 to determine projected adjusted price indices.

( y=23.699x + 1958.3 from Q2)

R^2+0.9799

3. Use projected real income, adjusted price indices, and tax to estimate Mrs. Cook's net actual income for 2019 - 2028.

4. Determine the present value of the future net cash flow.

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Number 1 2 3 Year 2004 2005 Sample Varianc Sample Deviati Mean Median 227951.0084 477.4421519 $31,104.12 $30,993.06 2006 4 2007 2008 5 2009 6 7 Gross Income $60,056.00 $61,257.00 $62,482.00 $63,732.00 $65,007.00 $66,307.00 $67,633.00 $68,986.00 $70,366.00 $71,773.00 $73,208.00 $74,672.00 $76,165.00 $77,688.00 $79,242.00 Price Index 188.9 195.3 201.6 207.3 215.3 214.5 218.1 224.9 229.6 233 236.7 237 240 245.1 251.1 Adjusted Price Index 1.889 1.953 2.016 2.073 2.153 2.145 2.181 2.249 2.296 2.33 2.367 2.37 2.4 2.451 2.511 2010 2011 2012 2013 2014 2015 2016 2017 2018 Real Income $31,792.48 $31,365.59 $30,993.06 $30,743.85 $30,193.68 $30,912.35 $31,010.09 $30,674.08 $30,647.21 $30,803.86 $30,928.60 $31,507.17 $31,735.42 $31,696.45 $31,557.95 8 9 10 11 12 13 14 15 SUMMARY OUTPUT Regression Statistics Multiple R 0.98987728 R Square 0.97985702 Adjusted R Square 0.97830757 Standard Error 0.65867192 Observations 15 ANOVA df F Significance F 632.386291 2.08E-12 1 Regression Residual Total SS 274.359967 5.64003303 280 MS 274.359967 0.43384869 13 14 Year Adjusted Price Index Coefficients Standard Error 1958.25615 2.10428052 23.6987101 0.94239611 t Stat 930.606034 25.1472919 P-value 9.62E-33 2.08E-12 Lower 95% 1953.71013 21.6627871 Upper 95% 1962.80217 25.7346331