Bill Clinton reportedly was paid $15.0 million to write his book My Life. The book took three years to write. In the time he spentwriting, Clinton could have been paid to make speeches. Given hispopularity, assume that he could earn $8.2 million per year(paid at the end of theyear) speaking instead of writing. Assume his cost of capital is 9.3% per year.

a. What is the NPV of agreeing to write the book(ignoring any royaltypayments)?

b. Assumethat, once the book isfinished, it is expected to generate royalties of $4.8 million in the first year(paid at the end of theyear) 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 royaltypayments?