Page 51 - Economic Damage Calculations

kets approach typically includes a risk premium above the risk-free rate to account for risk inher-
ent in the cash flow or income stream.

capitalization rate (direct capitalization rate). Any divisor (usually expressed as a percentage)
used to convert anticipated economic benefits of a single period into value. fn 3

cash flows. See income.

causation. An act from which an injury results as a natural, direct, uninterrupted consequence and
without which the injury would not have occurred.

certainty equivalent. The value that an investor would be willing to accept as a sum certain in ex-
change for an uncertain outcome.

company-specific risk. An unsystemic risk specific to a certain company's operations and reputa-
tion.

compounding periods. The number of periods (typically years) used in a discounting calculation, in
which the discount factor is calculated by 1/(1+rate)^periods.

cost of capital. The expected rate of return that the market requires in order to attract funds to a par-
ticular investment. fn 4

cost of debt. The effective interest rate that a company pays on its current debt.

cost of equity. The required rate of return that a stockholder demands from a publicly traded com-
pany in exchange for buying a share and assuming the risk associated with it.

country risk. The risk associated with an entity's being located in, doing business in, or having deal-
ings with other entities in a particular company.

damage period. The amount of time related to the defendant’s alleged wrongdoing or other loss
event for which damages, if any, are computed. fn 5

Daubert. A Daubert motion is a motion, pursuant to federal law, consistent with Rule 702 of the
Federal Rules of Evidence, raised before or during trial, to exclude the presentation of unquali-
fied or unsupported evidence to the jury. fn 6

de minimus risk. A Latin expression meaning about minimal things, which is used mostly as part of
de minimus non curat praetor or de minimus non curat lex, to say that the law is not interested in

fn 3 SSVS No. 1.

fn 4 Ibid.
fn 5 Defined within the text of the AICPA Forensic and Valuation Services (FVS) Section Special Report 09-1, Introduction to Civil
Litigation Services.

fn 6 Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993).

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