Title

Unsettled Issues in Measuring Lost Profits

Document Type

Article

Journal/Book Title/Conference

Journal of Legal Economics

Volume

9

Issue

3

Publication Date

2000

First Page

19

Last Page

32

Abstract

Many ofthe elements involved in calculating lost profits have been well-addressed in the literature. Indeed, the Journal of Forensic Economics devoted a special section to commercial damages in 1993, including articles on estimating lost profits by Foster, Trout, and Gaughan (1993), Manley and Reed (1993), and Plummer and McGowin (1993). However, several issues related to the determination of lost profits have received surprisingly little attention from economists, accountants, and lawyers. Foremost among these are the treatment of (1) the implicit cost of capital as a variable cost, (2) owner compensation issues, and (3) income taxes on lost profits. This paper addresses these three potentially important elements that may arise in a lost profit appraisal.

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