Fundamentals of Financial Management (MindTap Course List)
14th Edition
ISBN: 9781285867977
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 5, Problem 38P
Summary Introduction
To Determine: The amount that is to write by city.
Introduction: The
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It is now December 31, 2017 (t = 0), and a jury justfound in favor of a woman who sued the city for injuries sustained in a January 2016 accident.She requested recovery of lost wages plus $300,000 for pain and suffering plus $60,000for legal expenses. Her doctor testified that she has been unable to work since the accidentand that she will not be able to work in the future. She is now 62, and the jury decided thatshe would have worked for another 3 years. She was scheduled to have earned $36,000 in2016. (To simplify this problem, assume that the entire annual salary amount would havebeen received on December 31, 2016.) Her employer testified that she probably wouldhave received raises of 3% per year. The actual payment for the jury award will be madeon December 31, 2018. The judge stipulated that all dollar amounts are to be adjusted toa present value basis on December 31, 2018, using an 8% annual interest rate and usingcompound, not simple, interest. Furthermore, he stipulated that…
les
You are serving on a jury. A plaintiff is suing the city for injuries sustained after a freak street-sweeper accident. In the trial, doctors
testified that it will be five years before the plaintiff is able to return to work. The jury has already decided in favor of the plaintiff. You
are the foreperson of the jury and propose that the jury give the plaintiff an award to cover the following:
(a) The present value of two years' back pay. The plaintiff's annual salary for the last two years would have been $53,000 and
$56,000, respectively.
(b) The present value of five years' future salary. You assume the salary will be $59,000 per year.
(c) $180,000 for pain and suffering.
(d) $25,000 for court costs.
Assume the salary payments are equal amounts paid at the end of each month.
If the interest rate you choose is an EAR of 11 percent, what is the size of the settlement?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
Award
If you…
Julie Andrews was severely injured after she fell into an open manhole in the city. She is
suing the Department of Roadworks. Testimony was provided in the trial that Julie will be
unable to work for five years. The jury is considering the damages that should be
awarded to Julie and will include the following:
(a) The present value of the last two years' pay. Julie Andrews' annual salary for the last
two years would have been $53,000 and $56,000, respectively.
(b) The present value of five years' future salary. Julie Andrews' salary is assumed to be
$59,000 per year.
4
(c) $180,000 for her injuries.
(d) $25,000 for her legal costs.
Assume that her salary is paid in equal amounts at the end of each month.
The interest rate is an effective annual rate of 11 percent. What is the dollar value of the
damages payment to Julie Andrews? (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g., 32.16.)
Award
Chapter 5 Solutions
Fundamentals of Financial Management (MindTap Course List)
Ch. 5 - Prob. 1QCh. 5 - Explain whether the following statement is true or...Ch. 5 - If a firms earnings per share grew from 1 to 2...Ch. 5 - Prob. 4QCh. 5 - Prob. 5QCh. 5 - The present value of a perpetuity is equal to the...Ch. 5 - Banks and other lenders are required to disclose a...Ch. 5 - What is a loan amortization schedule, and what are...Ch. 5 - Prob. 1PCh. 5 - Prob. 2P
Ch. 5 - FINDING THE REQUIRED INTEREST RATE Your parents...Ch. 5 - TIME FOR A LUMP SUM TO DOUBLE If you deposit money...Ch. 5 - TIME TO REACH A FINANCIAL GOAL You have 42,180.53...Ch. 5 - Prob. 6PCh. 5 - Prob. 7PCh. 5 - LOAN AMORTIZATION AND EAR You want to buy a car....Ch. 5 - PRESENT AND FUTURE VALUES FOR DIFFERENT PERIOOS...Ch. 5 - Prob. 10PCh. 5 - GROWTH RATES Shalit Corporations 2014 sales were...Ch. 5 - EFFECTIVE RATE OF INTEREST Find the interest rates...Ch. 5 - Prob. 13PCh. 5 - FUTURE VALUE OF AN ANNUITY Find the future values...Ch. 5 - Prob. 15PCh. 5 - Prob. 16PCh. 5 - EFFECTIVE INTEREST RATE You borrow 85,000; the...Ch. 5 - Prob. 18PCh. 5 - FUTURE VALUE OF AN ANNUITY Your client is 40 years...Ch. 5 - Prob. 20PCh. 5 - Prob. 21PCh. 5 - Prob. 22PCh. 5 - FUTURE VALUE FOR VARIOUS COMPOUNDING PERIODS Find...Ch. 5 - Prob. 24PCh. 5 - FUTURE VALUE OF AN ANNUITY Kind the future values...Ch. 5 - PV AND LOAN ELIGIBILITY You have saved 4,000 for a...Ch. 5 - EFFECTIVE VERSUS NOMINAL INTEREST RATES Bank A...Ch. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 - REQUIRED LUMP SUM PAYMENT Starting next year, you...Ch. 5 - Prob. 32PCh. 5 - FV OF UNEVEN CASH FLOW You want to buy a house...Ch. 5 - AMORTIZATION SCHEDULE a. Set up an amortization...Ch. 5 - Prob. 35PCh. 5 - NONANNUAL COMPOUNDING a. You plan to make five...Ch. 5 - Prob. 37PCh. 5 - Prob. 38PCh. 5 - REQUIRED ANNUITY PAYMENTS Your father is 50 years...Ch. 5 - Prob. 40PCh. 5 - Prob. 41SPCh. 5 - Prob. 42IC
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