Page 58 - Calculating Lost Profits

Alternatively, prejudgment interest using an annual compounding method is calculated as follows:

Interest = Damages Amount × ([1 + Rate] Number of Years – 1)

The following is a calculation of compound interest (annual compounding), using similar inputs to those
from the preceding simple interest calculation.

Figure 8.2. Prejudgment Interest Using Annual Compounding

Courts have accepted and made calculations using annual compounding, quarterly compounding,
monthly compounding, daily compounding, or even continuous compounding. fn 11

Prejudgment Interest Period

Although federal law frequently allows for prejudgment interest to accrue from the date of harm to the
judgment date, state court cases may have prejudgment interest begin to accrue (when permitted) from

fn 11 Quarterly compounding: U.S. Philips Corp. v. KXD Technology, Inc., 2007 WL 4984150, at *2 (C.D.Cal. 2007). Annual com-
pounding: Mars, Inc. v. Coin Acceptors, Inc., 513 F. Supp. 2d 128, 137 (D.N.J. 2007). Daily compounding: Uniroyal, Inc. v. Rudkin-
Wiley Corp., 939 F.2d 1540, 1545 (Fed. Cir. 1991).

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