A 35-year-old employee, who expected to work another 30 years,

A 35-year-old employee, who expected to work another 30 years, is injured in a plant accident and will never work again. His wages next year will be $40,000. A study of wages across the plant found that every additional year of seniority tends to add 1 percent to the wages of a worker, other things held constant. Assuming a nominal discount rate of 10 percent and an expected rate of inflation of 4 percent per year over the next 40 years, what lumpsum compensation should this worker receive for the lost wages due to the injury?



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