Final Project

Anne was injured in an automobile accident on November 1, 2011 and has not worked since the date of the accident. She alleges it is unlikely that she will ever be able to return to work. She is a college graduate and worked as an assistant manager at a retail store.

 

ASSUMPTIONS:

1. Anne was born on January 19, 1965.

2. Anne will not return to work over her remaining work-lifeexpectancy.

3. Present value calculations are based on a trial date of September 10, 2013.

4. Anne's earnings would increase at an average annual rate of 2 percent over her work-life expectancy.

5. Anne received retirement contributions equals to 3 percent of her annual salary.

6. Anne received health care insurance coverage with an annual cost of $5,300 from her employer. The growth rate is 3.5%

7. Anne requires household services at an annual cost of $15,000 as of the date of the accident.

8. Anne will need household services over her lifetime.

9. Household services are estimated to grow at the rate of projected inflation. The growth rate is 2%.

10. Anne incurred medical costs totaling $26,600 for surgery performed in February 2012.

11. Anne will incur physical therapy costs of $6,000 per year from the trial date through the end of her life. The growth rate is 3.5%

12. Anne earned an annual salary of $78,000 at the time of the accident

13. The remaining work life expectancy is 16.53 years. Date at end of work life expectancy is 12/5/2028.

14. Date at end of life expectancy is 18/7/2047.

15. Discount rate is 2.5%

 

Required: What are the economic losses to Anne Lewis resulting from an accident on November 1, 2011?

 

Instructions:

• Lost fringe benefits = lost retirement + lost health insurance

 

Use the following table format to show the summary of loss calculations:

 

	Lost Earnings	Lost Fringe Benefits	Household	Medical Expenses	Total Losses
Past losses (before the trial date)
Future losses (after the trial date)
Totals

 

Notes: You are required to show all your calculations

Remember that you need to calculate the lost earnings and lost fringe benefits till 12/5/2028 (Date at end of work life expectancy). However, you need to calculate the household and medical expenses till 18/7/2047 (Date at end of life expectancy).