b. Mr Jones sustained severe injuries in an accident at work and sued his employer. Today,...
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b. Mr Jones sustained severe injuries in an accident at work and sued his employer. Today, two years after the accident, the industrial tribunal has concluded its proceedings and found the employer guilty. The judge has ordered the employer to pay Mr Jones an award today to cover the following: the value in today's money of his yearly pay for the two years between the accident and the conclusion of the trial; the present value of what would have been his future monthly salary for four years from the conclusion of the trial; 50,000 for medical expenses and 20,000 for legal costs. Mr Jones' salary for the two years prior to the conclusion of the trial would have been 30,000 for the first year and increasing to 32,000 in the second year. His salary after the trial would have stayed at 32,000. The judge also provided the following instructions for the calculations. Mr Jones' salary for the two years prior to the conclusion of the trial should be included in the calculations as two lump sums occurring at the end of the respective years. The salary after the trial should be included in the calculation as a series of monthly payments. The interest rate to be used for all calculations is a monthly interest rate of 1%. (i) Calculate the effective annual interest rate assuming monthly compounding. [5 marks] (ii) Using the appropriate interest rates, calculate the value, at the conclusion of the trial, of the full award, which includes today's value of past and future pay, medical and legal expenses. [12 marks] (iii) The interest rate was set by the judge. Does the interest make a difference to Mr Jones' final award? Why? Would Mr Jones have been better off with a higher or a lower interest rate? Explain, illustrating your answer with numerical examples. [12 marks] b. Mr Jones sustained severe injuries in an accident at work and sued his employer. Today, two years after the accident, the industrial tribunal has concluded its proceedings and found the employer guilty. The judge has ordered the employer to pay Mr Jones an award today to cover the following: the value in today's money of his yearly pay for the two years between the accident and the conclusion of the trial; the present value of what would have been his future monthly salary for four years from the conclusion of the trial; 50,000 for medical expenses and 20,000 for legal costs. Mr Jones' salary for the two years prior to the conclusion of the trial would have been 30,000 for the first year and increasing to 32,000 in the second year. His salary after the trial would have stayed at 32,000. The judge also provided the following instructions for the calculations. Mr Jones' salary for the two years prior to the conclusion of the trial should be included in the calculations as two lump sums occurring at the end of the respective years. The salary after the trial should be included in the calculation as a series of monthly payments. The interest rate to be used for all calculations is a monthly interest rate of 1%. (i) Calculate the effective annual interest rate assuming monthly compounding. [5 marks] (ii) Using the appropriate interest rates, calculate the value, at the conclusion of the trial, of the full award, which includes today's value of past and future pay, medical and legal expenses. [12 marks] (iii) The interest rate was set by the judge. Does the interest make a difference to Mr Jones' final award? Why? Would Mr Jones have been better off with a higher or a lower interest rate? Explain, illustrating your answer with numerical examples. [12 marks]
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Business Law The Ethical Global and E-Commerce Environment
ISBN: 978-0071317658
15th edition
Authors: Jane Mallor, James Barnes, Thomas Bowers, Arlen Langvardt
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