ohn Howard reportedly was paid $390 000 to write his book Lazarus Rising. The book took three years to write. In the tim

[answerhappygod]

ohn Howard reportedly was paid
$390 000
to write his book Lazarus
Rising.
The book took three years to write. In the time he
spent​ writing, Howard could have been paid to make speeches.
Given his significance as​ Australia's second-longest serving
Prime​ Minister, assume that he could earn
$280 000
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
$180 000
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?