Problem:
Kenny Powers, a promising young baseball pitcher is killed in a plane crash. It was anticipated that he could have earned $500,000 a year for the next 20 years. The attorney for the plaintiff's estate argues that the lost income should be discounted back to the present at 5%. The lawyer for the defendant's insurance company argues for a discount rate of 10%.
Required:
Question: What is the difference between the present value of the settlement at 5% and 10%? Compute each separately.
Note: Please show guided help with steps and answer.