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Bill Clinton reportedly was paid $10 million to write his book My Life. The book 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.
a. What is the NPV of agreeing to write the book (ignoring any royalty payments)?
b. Assume that, once the book was finished, it was expected to generate royalties of $5 million in the first year (paid at the end of the year) and these royalties were expected to decrease at a rate of 30% per year in perpetuity. What is the NPV of the book with the royalty payments?
An MNC is considering establishing a two-year project in New Zealand with a $30 million initial investment. What is the break-even salvage value?
New tax laws allow you to depreciate the? equipment, costing $7.5 million over three rather than five years using? straight-line depreciation.
Introduces four major pieces of federal legislation that has impacted real estate industry and links federal involvement in housing to US Constitution.
Twice Shy Industries has debt-equity ratio of 1.4. Its WACC is 9.4 percent,its cost of debt is 6.7 percent. The corporate tax rate is 35 percent.
Carey Company is borrowing $225,000 for one year at 9.5 percent from Second Intrastate Bank. The bank requires a 15 percent compensating balance. The principal refers to funds the firm can effectively utilize (Amount borrowed − Compensating balance).
Massey Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $520,000 is estimated to result in $215,000 in annual pretax cost savings. The press also requires an initial investment in sp..
You invest 55% of your money in security A with a beta of 1.4 and the rest of your money in security B with a beta of 0.9. The beta of the resulting portfolio is. How bond options can be used for hedging strategies?
Assume a 25-year, $490,000 mortgage with a rate of 7.2 percent. 9 years into the mortgage, rates have fallen to 6.2 percent. What would be the monthly saving to a homeowner from refinancing the outstanding mortgage balance at the lower rate?
Calculate your net profit on the option contract if J & J's stock price rises to $94.00 and you exercise the option.
The Fast Reader Company supplies bulletin board services to numerous hotel chains nationwide.
Your finance text book sold 54,500 copies in its first year. The publishing company expects the sales to grow at a rate of 19.0 percent for the next three years, and by 6.0 percent in the fourth year. Calculate the total number of copies that the pub..
Prepare the cash flows from operating activities section only of the company’s 2017 statement of cash flows using the indirect method.
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