ion per year (paid at the end of the year) speaking instead of writing. Assume his cost of capital is 10.2 What is the NPV of agreeing to write the book (ignoring any royalty payments)? Assume that, once the book is finished, it is expected to generate royalties of $5.2 million in the first yea of the year) and these royalties are expected to decrease at a rate of 30% per year in perpetuity. Wha book with the royalty payments? What is the NPV of agreeing to write the book (ignoring any royalty payments)? e NPV of agreeing to write the book (ignoring any royalty payments) is $ (Round to the nearest doll
ion per year (paid at the end of the year) speaking instead of writing. Assume his cost of capital is 10.2 What is the NPV of agreeing to write the book (ignoring any royalty payments)? Assume that, once the book is finished, it is expected to generate royalties of $5.2 million in the first yea of the year) and these royalties are expected to decrease at a rate of 30% per year in perpetuity. Wha book with the royalty payments? What is the NPV of agreeing to write the book (ignoring any royalty payments)? e NPV of agreeing to write the book (ignoring any royalty payments) is $ (Round to the nearest doll
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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Transcribed Image Text: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?
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.)
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