ohn Howard reportedly was paid $390 000 to write his book Lazarus Rising. The book took three years to write. In the tim
Posted: Wed Mar 30, 2022 3:41 pm
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?
$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?