Sarah, age 47, is married with two children in high school. She estimates that her average...
Sarah, age 47, is married with two children in high school. She estimates that her average annual earnings over the next 18 years will be $95,000. She estimates that 40% of her average annual earnings will be used to pay taxes, insurance premiums, and the cost of self-maintenance. The remainder will be used to support the family. Sarah wants to calculate the human life value and believes that a 5.5% discount rate is appropriate. Calculate Sarah's human life value.
Round your answer to the nearest dollar.
Homework Answers
Amount used to support the family = 95000*(1-40%) = 57000 per annum
The number of years = 18
Discount rate = 5.5%
Human life value = Annual amount*(1-1/(1+r)^n)/r
= 57000*(1-1/1.055^18)/ 0.055
=$ 641026
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