Bill Clinton reportedly was paid $15 million to write his book My Way. 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.

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 $5million in the first year(paid at the end 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 payment?

c. How many IRRs are there in part (a)? Does the IRR rule give the right answer in this case? How many IRRs are there in part(b)? Does the IRR rule work in this case?