Jack Smith

JackSmith reportedly was paid $ 9.8

$9.8 million to write his book The Fork in the Road

TheForkintheRoad. The book took three years to write. In the time he spentwriting, Jack Smith

JackSmith could have been paid to make speeches. Given hispopularity, assume that he could earn $ 8.5

$8.5 million a year(paid at the end of theyear) speaking instead of writing. If his cost of capital is 10 %

10% peryear, then the NPV of agreeing to write the book(ignoring any royaltypayments) is negative $ 11 comma 338 comma 242

$11,338,242. How many IRRs are there in thisproblem? Does the IRR rule give the right answer in thiscase? (Note: Consider the upfront payment as a positive cash flow and the opportunity cost of missed speaking fees as negative cashflows.)