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Question
Bill Clinton reportedly was paid $15 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.
1. What is the NPV of agreeing to write the book (ignoring any royalty payments)?
2. 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?
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The Common Stock account for Baltimore Corporation on January 1, 2018 was $67,500. On July 1, 2018 Baltimore issued an additional 9,500 shares of common stock.
John had kept the stock, and at the end of the second year that stock's price jumped to $100. What was his second year's return?
Kenny, Inc., is looking at setting up a new manufacturing plant in South Park. The company bought some land six years ago for $7.6 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent fac..
To find out if the results of the study have any practical applications, which section of the research manuscript should you read?
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Initial investment = $1,000,000 machine, the project term is 6 years, sales for year 1 are estimated to be $1,000,000, and will grow by 7.5% per year through year 5, sales for year 6 = $500,000, variable costs are estimated to be 30% of sales & fixed..
We have futures contracts on Treasury bonds, but we do not have futures contracts on individual corporate bonds. We have cattle and hog futures but no chicken futures. Explain why the market has developed in this manner. What do you think are the mos..
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The tax rate is 34 percent and the discount rate is 15 percent. What is the financial break even point.
Assuming a tax rate on ordinary income of 25% and a long-term capital gain rate of 10%, how much would you pay in taxes if you sold stock "A" for a $200 capital gain after holding it for 5 months, stock "B" for a $300 capital gain after holding it fo..
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