Page 40 - Economic Damage Calculations

Figure 6-1

2007 2008 2009 2010 2011 2012 Total
“But-For” Profits $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $6,000,000
Actual/Impaired Profits $100,000 $100,000 $500,000 $700,000 $900,000 $1,000,000 $3,300,000

Lost Profits $900,000 $900,000 $500,000 $300,000 $100,000 $0 $2,700,000

Ex Post Approach

Discount Factor 1.0000 1.0000 1.0000 0.8696 0.7561 0.6575
Present Value of Lost $900,000 $900,000 $500,000 $260,870 $75,614 $0 $2,636,484
Profits
Prejudgment Interest 0.1025 0.0500 — — — —
Factor
Prejudgment Interest $92,250 $45,000 $0 $0 $0 $0 $137,250
PV of Lost Profits, $992,250 $945,000 $500,000 $260,870 $75,614 $0 $2,773,734
Incl. PJI

Ex Ante Approach
Discount Factor 0.9325 0.8109 0.7051 0.6131 0.5332 0.4636
Present Value of Lost $839,254 $729,786 $352,554 $183,941 $53,316 $0 $2,158,852
Profits
Prejudgment Interest 0.1297 0.1297 0.1297 0.1297 0.1297 0.1297
Factor
Prejudgment Interest $108,873 $94,673 $45,736 $23,862 $6,917 $0 $280,060
PV of Lost Profits, $948,128 $824,459 $398,289 $207,803 $60,233 $0 $2,438,912
Incl. PJI
Difference Between Ex Ante and Ex Post $334,822
Values
12%
Discount Rate: 15%
Prejudgment Interest Rate: 5%

Judgment Date: 6/1/2009
Date of Damages Event: 12/31/2009

In this example, the ex ante analysis results in a decrease in the damages award of more than $334,000,
or 12 percent, over the entire damage period. In 2011, damages decreased by $15,000 just due to the dif-
ference in the value of the year 2011 lost profits ($100,000). In the ex post approach example, the
$100,000 loss in 2011 is brought back to the judgment date at the discount rate of 15 percent, and it is
worth $75,614 as of June 2009.

By comparison, in the ex ante approach example, the $100,000 loss for 2011 is discounted to the De-
cember 2006 damages event, and then brought forward at the prejudgment interest rate of 5 percent to
the June 2009 value of $60,233.

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