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Bill Clinton reportedly was paid $ 9 . 8 million to write his book My Life. The book took three years to write. In the

Bill Clinton reportedly was paid $ 9.8 million to write his book My Life. 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 $ 8.2 million a year(paid at the end of the year) speaking instead of writing. Assume his cost of capital is 9.6% per year. Assume also that once the book is finished, it is expected to generate royalties of $ 4.51 million in the first year(paid at the end of the year) and these royalties are expected to decrease at 30% per year in perpetuity. The NPV of the book with the royalty payments is negative $ 2 comma 086 comma 000. How many IRRs are there in this problem? Does the IRR rule work in this case? Bill Clinton reportedly was paid $9.8 million to write his book My Life. 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 $8.2 million a year (paid at the end of the year) speaking instead of writing. Assume his
cost of capital is 9.6% per year. Assume also that once the book is finished, it is expected to generate royalties of $4.51 million in the first year (paid at the end
of the year) and these royalties are expected to decrease at 30% per year in perpetuity. The NPV of the book with the royalty payments is -$2,086,000. How
many IRRs are there in this problem? Does the IRR rule work in this case?
Use the araph below to determine how many IRRs there are in this problem
How many IRRs are there in this problem? (Select the best choice below.)
A. One IRR
B. Two IRRs
c. Three IRRs
Four IRRs
Question content area bottom
Part 1
Use the graph below to determine how many IRRs there are in this problem.
-20
-10
10
20
30
40
50
60
70
80
-0.2
3.4
7.1
10.8
Discount Rate (%)
NPV ($ millions)
The x-axis on the graph shows discount rate in percentage; the axis values range from minus 20 to 80, at intervals of 10. The y-axis on the graph shows NPV in millions of dollars; the axis values range from negative 1.946-.5 to 10.250+.5, at intervals of (10.250-negative 1.946)/10. There is a steep curve that starts from the higher values of NPV and from thereon it slopes downward to its lowest point that is a negative NPV value. From this lowest point, the curve starts sloping upward and ends at positive values of NPV corresponding to higher values of discount rate. From this lowest point, the curve starts sloping upward indicating an increase in NPV with the increase in discount rate.
How many IRRs are there in this problem?(Select the best choice below.)
A.
One IRR
B.
Two IRRs
C.
Three IRRs
D.
Four IRRs
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