Because Grand Central's insurance company will not help pay for punitive damage awards, the directors are concerned whether an award of $20,000,000 would be compensatory, punitive, or some of each. As part of your analysis, you will need to consider the time value of money and use an interest rate for discounting.
You remember reading that "corporate bond rates" are appropriate for discounting workers' earnings to present value. Suppose the current rate is 7%.
However, you also remember that since the losses are in terms of "real dollars", you will need to adjust the interest rate to an approximately "real rate" by subtracting the inflation rate. As an estimate of the inflation rate, use the median inflation rate implied by the real and nominal prices in Table 1 of the case.
Attachment:- valley-seats-and-cushions-data.xls