Question 1:

Paul was injured in an accident. In addition to considerable discomfort, the best estimate is that his medical expenses in 2009 will be $100,000. In the future, those expenses will increase at 10% per year. Paul had been earning $50,000 per year but will only earn 80% of that in the future. Labor economists expect those in Paul's occupation to experience a 3% annual increase in earnings. Assume Paul has a 10-year work life and a 20-year expected natural life remaining. Also, assume that the appropriate discount rate is 5%. How much should Paul be awarded? (Ignore tax considerations.)

Question 2:

Because of an antitrust violation, a business was destroyed. Its owner wants to collect for the value of the business.

a) What is the value of the business? (not a $ value but conceptually)

b) What is the appropriate horizon?

c) How would one decide on a discount rate?

Question 3:

A league could own all of the franchises rather than have them owned independently. (Major League Soccer, for example, is owned by a syndicate.) In that way, franchise location could be optimized and resources could be directed to their most valuable use. What is wrong with this strategy?