paulacase.docxPAULA’S PALETTE – QUESTIONS
Suppose you are Bob Roy. You have just confirmed that, for all practical purposes, Mrs. Park will be unable to work at all during the next ten years, including all of 2006. Write a report, addressed to Jack Smith, Chief Administrator of Paula’s, which covers the questions below. Be sure to follow the guidelines for writing a report found in the Gateway Web Site.
Q. 1. The data from Exhibit 3 is also in the Excel file income.xls on the course website. Use Excel, along with this file, to determine Mrs. Park’s real income for the last fifteen years. Do this by first converting each price index from percent by dividing by 100. Then, divide gross income by your converted (adjusted) price index. Using Excel, find the mean, median, standard deviation, and variance of her past real income. Explain the meaning of these statistics. Can you use mean income to forecast future earnings? Take into account both statistical and non-statistical considerations.
This spreadsheet analyzes Mrs. Park’s real income from 1991-2005. The statistics regarding the mean, median, standard deviation, and variance are explained as follows. The mean in other words is the average real income Mrs. Park has earned over the years. The median is described as the middle point of a number set. In this case it is Mrs. Park’s real income. This is an alternative way of finding the average amount she has earned. The standard deviation explains how close are far apart the real income values are from each other. The standard deviation found from her real income is small, meaning the total real incomes are close to each other from one year to the next. Mean income can be used to forecast future earnings due to having an average number and knowing that future income can range around that number. It can also fluctuate higher or lower than that which can help estimate future earnings.
Q. 2. How do you interpret the price indices in Exhibit 3? How do economists construct them? Use Excel regression to analyze the relationship between the adjusted price index (dependent variable and year (independent variable). Interpret your regression findings by discussing the coefficient of determination (R-square), the regression coefficient, the regression equation, and the p value. Can you use the regression equation to predict the price indices? Take into account statistical, macroeconomic, and other considerations.
Q. 3. Assume that Mrs. Park’s real income will not change over the next ten years. Use the mean real income from question 1 to determine projected real income for the future ten years of Mrs. Park’s work expectancy. Use the regression equation from question 2 to project adjusted price indices for the next ten years. Assume that Mrs. Park pays 20% of her actual income in taxes and that Green will not provide significant state assistance. Use the projected real income and adjusted price indices to estimate Mrs. Park’s net actual income for the next ten years. What would be the likely amount of an award to Mrs. Park based on a present value rate of 8%? Discuss the factors that could cause Mrs. Park’s future income to differ from your estimate.
Y = a + (Gross income from current year)-(gross income)
Q. 4. Would the merchant’s defense relieve Paula’s Palette from liability under the cause of action of false imprisonment? (Brandon)
No, Nancy Park was wrongfully detained in a room for about an hour which was when the manager of the store was suppose to come back from their meeting. Since she was restricted from leaving without any legal justifications, the store Paula’s Palette had caused false imprisonment. In the letter Park asks why she was being detained and the employee would not say why only to wait for the manager. She then offered to empty her pockets and that was then she was released upon the manager's arrival.
Q. 5. Assuming that Paula’s Palette is liable for false imprisonment and assuming that Mrs. Park is deemed unable to locate another job for life due to her present medical condition, is a court likely to award her compensation for loss of future income? What standard will a court consider in determining whether Mrs. Park is entitled to compensation? In your opinion, is Mrs. Park’s settlement offer reasonable? Is she entitled to anything else in her damage claims? Support your opinions with a discussion of the legal and practical possibilities. (CHRISTIAN)
Mrs. Parks is likely entitled to compensation for future income due to her medical condition as the store was the direct cause of her injuries. In result, her condition unables her to do the basic functions of her job and is in a loss of her dependent income as shown in (Exhibit 3). The courts are likely to considering store negligence on account of the dangerous conditions they amounted into detaining her as well as the fact that she was not visually seen shoplifting. Her compensation does seem quite outrageous at first, however, the amount she is claiming as a 55-year old with no future income due to the injuries is quite reasonable. Her claims to cover medical costs seems reasonable as well as she is said to have a irreparable back issue and a permanent disability.
Q. 6. What actions would you recommend should be taken to prevent a reoccurrence of a situation similar to that involving Mrs. Park? What company policies need to changed or added? Discuss the relevant management issues.
