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Licensed Unlicensed Requires Authentication Published by De Gruyter October 6, 2006

Lost Profits Damages to New Businesses: Adjusting for Survival

  • David A MacPherson and Stanley P. Stephenson

Survival risk of new businesses is a challenging issue to incorporate into lost profits analyses used in litigation, an issue some financial experts and courts ignore rather than consider explicitly. This paper considers several ways to make qualitative and quantitative adjustments for the survival rates of new businesses. The paper concludes firm-specific modeling of survival rates is the most appropriate way to weight future economic returns because it offers the best alternative in terms of fitting the analysis to the facts of the case and doing so in a credible and clear manner.

Published Online: 2006-10-6

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