Jack Smith reportedly was paid $10.3 million to write his book The Fork in the Road The Fork in theRoad. The book took three years to write. In the time he spent writing, Jack Smith could have beenpaid to make speeches. Given his popularity, assume that he could earn $ 7.6 million a year (paid atthe end of the year) speaking instead of writing. If his cost of capital is 10 % per year, then the NPV ofagreeing to write the book (ignoring any royalty payments) is -$8,600,075. How many IRRs are therein this problem? Does the IRR rule give the right answer in this case? (Note: Consider the upfrontpayment as a positive cash flow and the opportunity cost of missed speaking fees as negative cashflows.)

Introduction:IRR is the discount at which the present value of cash inflows is equal to the present…

Answered: Jack Smith reportedly was paid $10.3…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Bill Clinton reportedly was paid $15.0 million to write his book My Life. The book took three years to write. In the time he spent writing, Clinton could have been paid to make speeches. Given his popularity, assume that he could earn $8.2 million per year (paid at the end of the year) speaking instead of writing. Assume his cost of capital is 9.5% per year. a. What is the NPV of agreeing to write the book (ignoring any royalty payments)? b. Assume that, once the book is finished, it is expected to generate royalties of $5.2 million in the first year (paid at the end of the year) and these royalties are expected to decrease at a rate of 30% per year in perpetuity. What is the NPV of the book with the royalty payments? a. What is the NPV of agreeing to write the book (ignoring any royalty payments)? The NPV of agreeing to write the book (ignoring any royalty payments) is $ (Round to the nearest dollar.)
Bill Clinton reportedly was paid $15.0 million to write his book My Life. The book took three years to write. In the time he spent writing, Clinton could have been paid to make speeches. Given his popularity, assume that he could earn $8.6 million per year (paid at the end of the year) speaking instead of writing. Assume his cost of capital is 10.2% per year. a. What is the NPV of agreeing to write the book (ignoring any royalty payments)? b. Assume that, once the book is finished, it is expected to generate royalties of $5.2 million in the first year (paid at the end of the year) and these royalties are expected to decrease at a rate of 30% per year in perpetuity. What is the NPV of the book with the royalty payments?
Bill Clinton reportedly was paid $15.0 million to write his book My Life. The book took three years to write. In the time he spent writing, Clinton could have been paid to make speeches. Given his popularity, assume that he could earn $8.1 million per year (paid at the end of the year) speaking instead of writing. Assume his cost of capital is 9.3% per year. a. What is the NPV of agreeing to write the book (ignoring any royalty payments)? b. Assume that, once the book is finished, it is expected to generate royalties of $4.9 million in the first year (paid at the end of the year) and these royalties are expected to decrease at a rate of 30% per year in perpetuity. What is the NPV of the book with the royalty payments? a. What is the NPV of agreeing to write the book (ignoring any royalty payments)? The NPV of agreeing to write the book (ignoring any royalty payments) is $| (Round to the nearest dollar.) b. Assume that, once the book is finished, it is expected to generate royalties of…
Bill Clinton reportedly was paid $15.0 million to write his book My Life. The book took three years to write. In the time he spent writing, Clinton could have been paid to make speeches. Given his popularity, assume that he could eam $8.2 million per year (paid at the end of the year) speaking instead of writing. Assume his cost of capital is 10.3% per year. a. What is the NPV of agreeing to write the book (ignoring any royalty payments)? b. Assume that, once the book is finished, it is expected to generate royalties of $4.9 million in the first year (paid at the end of the year) and these royalties are expected to decrease at a rate of 30% per year in perpetuity. What is the NPV of the book with the royalty payments? CU a. What is the NPV of agreeing to write the book (ignoring any royalty payments)? The NPV of agreeing to write the book (ignoring any royalty payments) is $-187849643). (Round to the nearest dollar)
Bill Clinton reportedly was paid an advance of $10.0 million to write his book My Life. Suppose the book took three years to write. In the time he spent writing, Clinton could have been paid to make speeches. Given his popularity, assume that he could earn $7.6 million a year (paid at the end of the year) speaking instead of writing. Assume his cost of capital is 9.4% per year. a. What is the NPV of agreeing to write the book (ignoring any royalty payments)? b. Assume that, once the book is finished, it is expected to generate royalties of $4.8 million in the first year (paid at the end of the year) and these royalties are expected to decrease at a rate of 30% per year in perpetuity. What is the NPV of the book with the royalty payments? a. What is the NPV agreeing to write the book (ignoring any royalty payments)? The NPV of agreeing to write the book is $ million. (Round to three decimal places.) b. Assume that, once the book is finished, it is expected to generate royalties of $4.8…
Bill Clinton reportedly was paid an advance of $ 10.0 million to write his book My Life. Suppose the book took three years to write. In the time he spent writing, Clinton could have been paid to make speeches. Given his popularity, assume that he could earn $7.9 million a year (paid at the end of the year) speaking instead of writing. Assume his cost of capital is 9.3 % per year. a. What is the NPV of agreeing to write the book (ignoring any royalty payments)? b. Assume that, once the book is finished, it is expected to generate royalties of $ 5.5 million in the first year (paid at the end of the year) and these royalties are expected to decrease at a rate of 30% per year in perpetuity. What is the NPV of the book with the royalty payments?
Bill Clinton reportedly was paid $15.0 million to write his book My Life. The book took three years to write in the time he spent writing, Clinton could have been paid to make speeches. Given his popularity, Kassume that he could eam $8.3 milion per year (paid at the end of the year) speaking instead of writing. Assume his cost of capital is 10.3% per year. a. What is the NPV of agreeing to write the book (ignoring any royalty payments)? b. Assume that once the book is finished, it is expected to generate royatios of $4 8 million in the first year (paid at the end of the year) and these royalties are expected to decrease at a rate of 30% per year in perpetuity. What is the NPV of the book with the royalty-payments? a. What is the NPV of agreeing to write the book (ignoring any royalty payments)? The NPV of agreeing to write the book (ignoring any royalty payments) is $(Round to the nearest dollar)
Bill Clinton reportedly was paid an advance of $10.0 million to write his book My Life. Suppose the book took three years to write. In the time he spent writing, Clinton could have been paid to make speeches. Given his popularity, assume that he could earn $7.8million a year (paid at the end of the year) speaking instead of writing. Assume his cost of capital is 10.2%per year. a. What is the NPV of agreeing to write the book (ignoring any royalty payments)? b. Assume that, once the book is finished, it is expected to generate royalties of $4.8 million in the first year (paid at the end of the year) and these royalties are expected to decrease at a rate of 30% per year in perpetuity. What is the NPV of the book with the royalty payments?
Bill Clinton reportedly was paid $10 million to write his book My Life. Suppose the book took three years to write. In the time he spent writing, Clinton could have been paid to make speeches. Given his popularity, assume that he could earn $8 million per year (paid at the end of the year) speaking instead of writing. Assume his cost of capital is 10% per year. (Show excel spreadsheet workings) A. What is the NPV of agreeing to write the book (ignoring any royalty payments)? What is the : PV of losing the speaking fees_______ NPV of book deal_______ B. Assume that, once the book is finished, it is expected to generate royalties of $5 million in the first year (paid at the end of the year) and these royalties are expected to decrease at a rate of 30% per year in perpetuity. What is the NPV of the book with the royalty payments? What is the: PV of perpetuity at year 3_______ PV of perpetuity at year 0 _______ NPV of book deal______
K Bill Clinton reportedly was paid $15.0 million to write his book My Life. The book took three years to write. In the time he spent writing. Clinton could have been paid to make speeches. Given his popularity, assume that he could earn $8.2 million per year (paid at the end of the year) speaking instead of writing. Assume his cost of capital is 10.5% per year. a. What is the NPV of agreeing to write the book (ignoring any royalty payments)? b. Assume that, once the book is finished, it is expected to generate royalties of $4.8 million in the first year (paid at the end of the year) and these royalties are expected to decrease at a rate of 30% per year in perpetuity. What is the NPV of the book with the royalty payments? a. What is the NPV of agreeing to write the book (ignoring any royalty payments)? The NPV of agreeing to write the book (ignoring any royalty payments) is $(Round to the nearest dollar)
K Bill Clinton reportedly was paid $15.0 million to write his book My Life. The book took three years to write. In the time he spent writing, Clinton could have been paid to make speeches. Given his popularity, assume that he could earn $8.9 million per year (paid at the end of the year) speaking instead of writing. Assume his cost of capital is 10.5% per year. a. What is the NPV of agreeing to write the book (ignoring any royalty payments)? b. Assume that, once the book is finished, it is expected to generate royalties of $4.9 million in the first year (paid at the end of the year) and these royalties are expected to decrease at a rate of 30% per year in perpetuity. What is the NPV of the book with the royalty payments? ...
Bill Clinton reportedly was paid $15 million to write his book My Life. Supposethe book took three years to write. In the time he spent writing, Clinton could havebeen paid to make speeches. Given his popularity, assume that he could earn $8million per year (paid at the end of the year) speaking instead of writing. Assumehis cost of capital is 10% per year.a. What is the NPV of agreeing to write the book (ignoring any royalty payments)?b. Assume that, once the book is finished, it is expected to generate royalties of $5million in the first year (paid at the end of the year) and these royalties are expectedto decrease at a rate of 30% per year in perpetuity. What is the NPV of the bookwith the royalty payments? c. How many IRRs are there in part (a) of Problem 3? Does the IRR rule give the rightanswer in this case? How many IRRs are there in part (b) of Problem 3? Does theIRR rule work in this case?

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