Damages and Valuation
Valuation Methods
Present value converts a stream of future losses into the lump sum that would fund them today if invested. An economist applies a discount rate reflecting expected investment returns, sometimes offset against expected inflation in the underlying costs.
Awards for future medical care and lost earnings are typically reduced to present value, while past losses are not.
Alternative Names:
Discounting to Present Value, Present Cash Value
Why it Matters?
The discount rate is one of the most consequential and least scrutinized assumptions in a damages case. A difference of two percentage points can change a multimillion-dollar future care award substantially, and competing economists routinely reach very different totals from identical care plans. Defense analysis should engage the rate methodology directly rather than only contesting the underlying services.
Frequently Confused with
Related terms
Frequently asked questions
Why are future damages reduced to present value?
What is the total offset method?
