Accounting Question

Anonymous
timer Asked: Nov 20th, 2016

Question description

Need to determine solve NPV for the file attached.

Problem 7-5 Bill Clinton reportedly was paid $10 million to write his book My Life. Suppose the book writing, Clinton could have been paid to make speeches. Given his popularity, assume tha 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 is finished, it is expected to generate royalties of $5 mil year) and these royalties are expected to decrease at a rate of 30% per year in perpet royalty payments? Advance payment for book Foregone speaking fees Cost of capital Number of years $10.000.000 $8.000.000 10% 3 a. What is the NPV of agreeing to write the book (ignoring any royalty payments)? PV of speaking fees NPV of book deal b. Assume that, once the book is finished, it is expected to generate royalties of $5 mil year) and these royalties are expected to decrease at a rate of 30% per year in perpet royalty payments? Royalties for book Growth rate of royalties $5.000.000 -30% PV of perpetuity at year 3 PV of perpetuity at year 0 NPV of book deal Requirements 1. You will calculate the present value of the foregone speaking fees by using the func and cell references, calculate the present value of the foregone speaking fees (1 pt.). 2. In cell D16, by using the function PV and cell references, calculate the NPV of the b 3. In cell D23, by using the function PV and cell references, calculate the present value 4. You will calculate the present value (as of year 0) of the future royalty payments by the function PV and cell references, calculate the present value (as of year 0) of the 5. In cell D25, by using the function PV and cell references, calculate the NPV of the b his book My Life. Suppose the book took three years to write. In the time he spent hes. Given his popularity, assume that he could earn $8 million per year (paid at the his cost of capital is 10% per year. (ignoring any royalty payments)? pected to generate royalties of $5 million in the first year (paid at the end of the ase at a rate of 30% per year in perpetuity. What is the NPV of the book with the (ignoring any royalty payments)? pected to generate royalties of $5 million in the first year (paid at the end of the ase at a rate of 30% per year in perpetuity. What is the NPV of the book with the gone speaking fees by using the function PV. In cell D15, by using the function PV of the foregone speaking fees (1 pt.). references, calculate the NPV of the book deal (without royalties) (1 pt.). references, calculate the present value of the future royalty payments (1 pt.). 0) of the future royalty payments by using the function PV. In cell D24, by using he present value (as of year 0) of the future royalty payments (1 pt.). references, calculate the NPV of the book deal (with royalties) (1 pt.). 14910000

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