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From: ganns@hound.UUCP (R.GANNS)
Newsgroups: net.flame
Subject: re awards for lost earning power
Message-ID: <1317@hound.UUCP>
Date: Thu, 22-Aug-85 12:33:56 EDT
Article-I.D.: hound.1317
Posted: Thu Aug 22 12:33:56 1985
Date-Received: Sat, 24-Aug-85 15:29:39 EDT
Organization: AT&T Bell Labs, Holmdel NJ
Lines: 32


    If you figure on an annual salary of 25 K$, a potential return
on investment of 10% a year, and a 30 year period, then the 25 K$
 a year for 30 years is equivalent to about 235,000 right now.
In other words, if you invested the 235,000 $ in a fund
yielding a 10 % per year return, and withdrew 25,000 from this
fund each year, by the 30th year you would have just
emptied the fund. This assumes the interest is compounded annually,
automatically being reinvested in the fund.

    If you were awarded 1,000,000 $ right now, that is equivalent to
an annual salary of about 106,000 $ a year for 30 years.

     An annual salary of 50,000 $ has a present-worth of about
470,000 $ under the 30 year/ 10% return assumption.

    However, lost income is only part of the story -- you have
to consider the astronomical costs of therapy, special care,
etc. which result. Suppose you were completely disabled when
you had a 30 year career ahead of you at an average annual
salary of 50,000 $ -- then just the lost salary is worth about
470,000 $ up front (and this assumes no inflation and being
able to get 10 % on your money every year for the next 30 years).
Now also assume that you're 25 years old with a life expectancy
of 70 -- you'll be a quadraplegic or whatever for the next 45 years;
assume it costs 25 K$ per year for special care and equipment--
this present-worths out to about 247,000 $. So the total
present worth for care and lost income comes to about
720,000 $. SO a 1 million dollar award doesn't seem unreasonable.
    Of course, this ignores inflation effects, but you can get 
some idea of how valid the "earning power lost" argument is for
various amounts of money-- just consult standard present-worthing
tables.