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Mrs. Cook's real income is the amount she made year to year reported on her W-2s and/or Tax Returns. Although real income is an accurate reflection of what she makes every year, nominal income is much more relevant because it accounts for inflation. Nominal income can be used to forecast future earnings because inflation plays a big role in one's purchasing power making it a crucial element to account for. In order to calculate nominal income is to divide the real income by the adjusted price index, which is a measure of relative price changes, which consists of a set of figures constructed so that when the values for any two periods or locations are compared, the average change in prices between the two periods or locations will be shown. Nominal income not only allows us to see future income but past income's worth in the present day, as $1,000 had a significantly higher value 20 years ago than it does today. The mean shows us an average amount of income Mrs. Cook earned as it contains data from each observation in a dataset. The dataset is uniformly distributed from the lowest to the greatest values if the mean and median are both equal in value and or relatively similar which in this case they are.
2. Assume that Mrs. Cook's 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. Cook's 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. Cook's 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 7%?
After the incident that occurred at Art Vector, Candace Cook was left with an irreplaceable back injury and was unable to walk and sit for ten minutes at a time. In result she had to quit her job in which the doctor informed her she would never be able to work again because of her injuries. Candace Cook is now demanding Art Vector compensation for the loss of future income. By using mean adjusted price indices and projected real income, and taking tax into account, can give a more accurate picture of the net income Mrs. Cook would have earned for the next ten years (Mrs. Cook's work expectancy). Mean income is used to determine projected real income. Price indices help find net actual income because it can be used as a way to measure inflation and is a measure of how prices change over time. To find the price indices the regression formula found in question 2 is used. Using the regression formula the adjusted price indices can be projected by multiplying the slope by the year and then adding the y-intercept. Real income is how much money an individual makes after adjusting for inflation. Multiplying the real income by the projected price index for that year can find the gross income. After finding the gross income, the future value can be found by multiplying the income after taxes by the gross income. Present value is an applicable technique that considers the time value of money. Additionally, present value allows cash amounts expected to be paid or received at different times in the future to be brought to present day values. Present value can then be found by using the present value formula (FV / (1+i)n). NPV can then be found by taking the sum of present values for ten years. The NPV is $475,291.46 which is a more accurate amount of how much money Mrs. Cook would have made for the next ten years, which is less money than what she is requesting that Art Vector pay her for future income.
3. Assuming that Art Vector is liable for false imprisonment and assuming that Mrs. Cook is deemed unable to locate another job for life due to her present medical condition, is a court likely to award her compensation for loss of future income? What standard will a court consider in determining whether Mrs. Cook is entitled to compensation?
Assuming that Art Vector is liable for false imprisonment and that Mrs. Cook is deemed unable to locate another job for life due to her present medical condition, a court would likely award her compensation for loss of future income. The goal of compensatory damages is to economically restore a plaintiff for loss or injury, and Mrs. Cook was forced to leave her job in pharmaceutical sales due to the injury caused by Jay Kelly, the Loss Prevention Manager at Art Vector. When determining whether Mrs. Cook is entitled to compensation, the court will award an amount no more than what the actual loss is that Mrs. Cook would have earned (Caldwell v. Khler. 1993). The court must see reasonable proof of net income, income after tax deductions, in order to establish an amount that would fairly compensate the injured plaintiff.
4. ANSWER THIS BASED ON THE ANSWERS TO QUESTIONS 1-3. In your opinion, is Mrs. Cook's settlement offer reasonable? Is she entitled to anything else in her damage claims? Discuss the factors that could cause Mrs. Cook's future income to differ from your estimate in Q.3.