Reduce to Present Value
An award for future damages must be awarded as a definite lump sum amount set at the time of the judgment.
There are three ways of reducing to present value:
- Inflation-discount method
- Accounts for interest and inflation separately.
- Real interest method
- Sets a flat interest rate approximating the practical rate.
- Based on the principal that overpaying the plaintiff is better than underpaying him.
- Total offset method
- Says that interest and inflation will cancel each other out and just pays the actual awarded amount.