Robert Gant Valuation of Future Earnings
Assume that Mr. Gant leaves Sheriff's office in 2005. analysis by Prof. Rob assumptions: Mr. Gant would have worked at the Pinal County Sheriff's office as Sargeant from 2004 throug His wages would have risen at the rate of inflation for the US, averaging approximately 2.46% source: US Federal Reserve System. These future earnings should be discounted at the "cost of capital" that he faced, namely the i savings account: 4.30% on average during 1995-2004. source: US Federal Re Tax considerations are not included here, since the employer would have paid Mr. Gant, and paid the IRS. The date for estimating present values is January 1, 2005, when Mr. Gant would have begun t future earnings that are in question. Average annual earnings for a Sargeant in 2005 Mr. Gant worked for Pinal County Sheriff's Office in 2004 and earned $42,723 for the year. Actual Pinal County earnings for 2$42,723 from W-2 form submitted to IRS Life insurance Assuming a healthy non-smoking male at age 54 in 2005, we calculate that would be paid by the employer for the next 12 years on a $180,000 policy. This calcula of the current premia for a male of each age category from 54-65 years. = $17,853 Pension contribution: total of $4,000 was contributed by Pinal County to Mr. Gant in 2004. T should rise at the rate of inflation until retirement in 2016. Remaining payout at present discounted value: = $36,895 results: sum of present values of all future earnings to age 65: value of insurance premia from 2005-2030: value of anticipated pension payments from 2005-2030: total present value of lost income: $496,734 $17,853 $36,895 $551,482 Sargeant
Case 2:03-cv-02077-EHC
Document 72-4
Filed 11/14/2005
Page 1 of 4
bert Grosse 14-Nov-05 gh age 65, in 2016. during 1995-2004.
interest rate on his eserve System. he would have
the process of 5 were $46,384.
ed the current premia ation is the sum
This value
Case 2:03-cv-02077-EHC
Document 72-4
Filed 11/14/2005
Page 2 of 4
year Gant age
2004 53
2005 54
2006 55
2007 56
2008 57
2009 58
2010 59
2011 60
annual earnings $46,384 $47,525 $48,694 $49,892 $51,119 $52,377 0.0246 = average annual inflation rate discounted value of earnings $46,384 $45,566 $44,762 $43,972 $43,196 $42,434 0.043 = average annual return on 6-month certificates of deposit (includes sum of PV none of of future 2004 earnings earnings) $496,734 Sargeant life insurance premia for each age sum of premia present values
$53,665
$54,986
$41,686
$40,950
$958
$1,061
$1,219
$1,397
$1,559
$1,747
$1,977
$24,795
pension contribution by employer discounted value of pension contribution 0.043 sum of pension present values
$5,000
$5,000
$5,000
$5,000
$5,000
$5,000
$5,000
$0
$4,794
$4,596
$4,407
$4,225
$4,051
$3,884
$3,724
$46,119
Case 2:03-cv-02077-EHC
Document 72-4
Filed 11/14/2005
Page 3 of 4
2012 61
2013 62
2014 63
2015 64
2016 65
$56,338
$57,724
$59,144
$60,599
$62,090
$40,228
$39,518
$38,821
$38,136
$37,464
$2,258
$2,546
$2,908
$3,350
$3,815
$5,000
$5,000
$5,000
$5,000
$5,000
$3,570
$3,423
$3,282
$3,147
$3,017
Case 2:03-cv-02077-EHC
Document 72-4
Filed 11/14/2005
Page 4 of 4