Reference no: EM132473396

The following exercise is on estimating economic damages:

Point 1: Fred is a successful dentist in Boston. He has a comprehensive injury and a disability insurance policy that he has carried since shortly after he started his practice. During the first 15 years of his practice he has experienced the following net income:

Year Net Income

1 ........................... $56,000

2 ........................... 64,000

3 ............................ 70,000

4 ............................. 77,000

5 ........................... 85,000

6 ........................... 93,000

7 ............................ 101,000

8 ............................110,000

9 ............................ 124,000

10 .......................... 135,000

11 ..........................145,000

12 ..........................156,000

13 ..........................120,000

14 ........................... 117,000

15 .......................... 121,000

Point 2: At the beginning of his 13th year of practice he experienced an accident at the office in which he fell and hit his head. Ever since the accident he has experienced serious headaches and dizziness that he had not experienced before. As a result of these symptoms, Fred is unable to work the long hours that he once did and he has been unable to grow his practice. He fully expected to grow his income from his practice by about 10 percent a year. He has filed a claim (which is being contested) with his insurance company.

Point 3: Fred has hired you to measure the economic damages resulting from the accident. Fred was 42 years old at the time of the accident and he just turned 45 last week.

Question a. What information will you seek from Fred to help with your measurement of economic damages?

Question b. What do you think will comprise the components of your damage measurement?

Question c. Based on the information available to you, calculate the best estimate of the damages that you will seek on behalf of Fred, and show how you got to this estimate in detail.