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Future Lost Wages Formula:
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Future Lost Wages Calculation estimates the present value of income that would have been earned in the future but is lost due to specific circumstances. It accounts for wage growth and discount rates to determine the current monetary value.
The calculator uses the formula:
Where:
Explanation: The formula calculates the present value of future wage payments by discounting them back to today's value, accounting for expected wage growth over time.
Details: Present value calculation is crucial for accurately assessing the economic impact of lost future earnings in legal cases, insurance claims, and financial planning. It provides a fair current valuation of future income streams.
Tips: Enter current wage in USD, growth and discount rates as decimals (e.g., 0.03 for 3%), and the number of years. All values must be valid (wage > 0, years between 1-100).
Q1: What is the difference between growth rate and discount rate?
A: Growth rate represents expected annual wage increases, while discount rate reflects the time value of money and risk factors.
Q2: How should I determine appropriate growth and discount rates?
A: Growth rate can be based on historical wage increases or industry averages. Discount rate typically uses risk-free rates plus appropriate risk premiums.
Q3: Can this calculation be used for legal purposes?
A: Yes, this calculation is commonly used in personal injury and wrongful death cases to quantify economic damages, but should be performed by qualified experts.
Q4: What are the limitations of this calculation?
A: It assumes constant growth and discount rates, doesn't account for taxes, and may not reflect individual career progression or market volatility.
Q5: How does the time period affect the result?
A: Longer time periods generally result in higher present values due to compounding growth, though discounting reduces the impact of distant future payments.