A retired CEO was offered $15 million by a publisher to write a memoir. Suppose the book took three years to write. In the time spent writing, the former CEO could have been paid to make speeches. Given the popularity, assumethat the formerCEO could earn $7.9 millionper year (paid at the end of the year) speaking instead of writing. Assume the cost of capital is 9.4% 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 expectedto generate a oneoff royaltiesof $14 million in the first year (paid at the end of the year). What is the NPV of the book offer with the royalty payments?

3.Provide at least two scenarios when the NPV decision rule might generate a different decision outcome than the IRR rule. General discussion will be sufficient and you do not have to show your calculations when answering this question.