Instead of paying diana

Assignment Help Finance Basics
Reference no: EM131401775

Ten years ago Diana Torres wrote what has become the leading Tort textbook.She has beenreceiving royalties based on revenues reported by the publisher.These revenues started at $1million in the ?rst year, and grew steadily by 5% per year.Her royalty rate is 15% of revenue.Recently, she hired an auditor who discovered that the publisher had been under reportingrevenues.The book had actually earned 10% more in revenues than had been reported onher royalty statements.

(a) Assuming the publisher pays an interest rate of 4% on missed payments, how much money does the publisher owe Diana?

(b) The publisher is short of cash, so instead of paying Diana what is owed, the publisher iso?ering to increase her royalty rate on future book sales. Assume the book will generaterevenues for an additional 20 years and that the current revenue growth will continue. IfDiana would otherwise put the money into a bank account paying interest of 3%, whatroyalty rate would make her indi?erent between accepting an increase in the futureroyalty rate and receiving the cash owed today.

Reference no: EM131401775

Questions Cloud

Difference between the words sanguinary and sanguine : To understand the difference between the words sanguinary and sanguine is important for a reader of Shakespeare because the former means bloody and the latter means optimistic
Explain joseph conrad formal or informal writing style : Identify and explain Joseph Conrad's formal or informal writing style in this passage from The Heart of Darkness, citing specific examples from the text
Explain the author interpretation of the british empire : Identify the theme of this excerpt from The Heart of Darkness, by Joseph Conrad, and explain the author's interpretation of the British Empire
How do business ethics and business law interact with other : How do business ethics and business law interact with each other? Is one highly ethical and the other less ethical? If business ethics does not offer guidance about what is always the right thing to do, is one behavior as good as the next? How does t..
Instead of paying diana : Assuming the publisher pays an interest rate of 4% on missed payments, how much money does the publisher owe Diana?
Discuss the relevance of this kinked demand model : Do a survey of five or six firms in your area. Ask them how they believe other firms would respond to their increasing or decreasing price. Based on that survey, discuss the relevance of this kinked demand model compared to the one presented in th..
Describe the key strategic issues that uk carmakers : Describe the key strategic issues that UK carmakers have faced since the global financial crisis, including current quality & environmental scandals that have hit some of the major car manufacturers (e.g. Toyota, Volkswagen).
How is the american different from a european : How does Tyler address the following questions? Answer ALL with evidence from the text to support your points. How is the American different from a European? How does this difference make him a "new man" on the face of the earth
How do monopolists use power to manipulate outcomes : The economist Thorstein Veblen would not be surprised by this. He would argue that firms use market power because they can. How do monopolists use "power" to manipulate outcomes? (Institutionalist)

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the bonds current yield

A bond that matures in 10 years sells for $1,190. The bond has a face value of $1,000 and a yield to maturity of 9.7489%. The bond pays coupons semiannually. What is the bond's current yield? Round your answer to two decimal places.

  Prepare an analysis report using excel based on items a

Prepare an analysis report using Excel based on items a-s below.  Analyze the financials for 3M - 10-Ks for 2013 and 2014.  Your report should show your computations (including the inputs into each formula), as well as provide a brief explanation of ..

  What are the three internal operating schedules that most

What are the three internal operating schedules that most firms must prepare?

  Company balance sheet and income statement

Analyze the information contained in the company's balance sheet and income statement to answer the following questions:

  Laurence was presented with a capital expenditure for a

laurence was presented with a capital expenditure for a boiler that would cost 12000 today and would generate the

  What is its net income

Ebersoll Mining has $6 million in sales, its ROE is 12%, and its total assets turnover is 3.2(. The company is 50% equity financed. What is its net income?

  Exposure to interest rate risk

Exposure to Interest Rate Risk: - Is the cost of funds obtained by finance companies very sensitive to market interest rate movements? Explain.

  Analysis of strategy

Select one of these top U.S. companies competing in this industry, listed below, and complete a more in-depth analysis of its strategy (if you see your chosen company for the final project on this list, do not choose it; select a new company to re..

  Explain the buildup of receivables

Evaluate if Lealos should proceed or not and explain the buildup of receivables in this case. The required return is .95 percent per month.

  What is the minimal amount you should bid per park

Your required return is 15 percent and your tax rate is 34 percent. What is the minimal amount you should bid per park? (round to nearest $100)

  Unbiased estimator of the error variance

This assignment will guide you through the derivations needed to determine what is a unbiased estimator of the error variance in the context of a univariate linear regression. This assignment may be quite challenging.

  The authorized share capital of the alfred cake company is

the authorized share capital of the alfred cake company is 100000 shares. the equity is currently shown in the companys

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd