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Problem 11-3 Effect of discount rate [LO3] A brilliant young scientist is killed in a plane crash. It is anticipated that he could have earned $240,000 a year for the next 50 years. The attorney for the plaintiff's estate argues that the lost income should be discounted back to the present at 4 percent. The lawyer for the defendant's insurance company argues for a discount rate of 8 percent. What is the difference between the present value of the settlement at 4 percent and 8 percent? Compute each one separately. Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Input variables: $240,000 50 years Annual income Number of years Plaintiff's discount rate Defendant's discount rate Appendix plaintiff's factor Appendix defendant's factor 0.04 0.08 21.482 12.233 Solution and Explanation: PV at plaintiff's rate PV at defendant's rate Solution and Explanation: PV at plaintiff's rate PV at defendant's rate Difference Appendix values: PV at plaintiff's rate PV at defendant's rate Difference