Sarah, a 35-year-old marketing professional in Ontario, earns $80,000 annually. She and her partner, David, have two young children and want to ensure their family's financial stability if Sarah were to pass away. Using the Human Life Value approach, and assuming Sarah plans to work until age 65, an average annual raise of 2%, and a discount rate of 5%, which of the following is the best initial estimate of her economic value?

Question: Sarah, a 35-year-old marketing professional in Ontario, earns $80,000 annually. She and her partner, David, have two young children and want to ensure their family's financial stability if Sarah were to pass away. Using the Human Life Value approach, and assuming Sarah plans to work until age 65, an average annual raise of 2%, and a discount rate of 5%, which of the following is the best initial estimate of her economic value?

Answer options: ✅ Approximately $1,250,000

• Approximately $800,000
• Approximately $2,400,000
• Approximately $1,600,000

Correct answer: Approximately $1,250,000

Explanation: The Human Life Value method calculates the present value of future earnings. It can be complex, but for a quick estimate without precise PVA formulas, it's roughly (Annual Income * Years to Retirement) / Discount Rate. A more refined calculation typically uses a present value of an annuity formula incorporating growth, which for these inputs yields around $1,250,000.