Question
Mary is in contract negotiations with a publishing house for her new novel. She has two options. OPTION 1: She may be paid $90000 up
"Mary is in contract negotiations with a publishing house for her new novel. She has two options. OPTION 1: She may be paid $90000 up front, and receive royalties that are expected to total $2500 at the end of each of the next 6 years. Alternatively, OPTION 2: she can receive $100000 up front and no royalties. Which of the following investment rules would indicate that she should take Option 1, given a discount rate of 5%? Rule I: The Net Present Value rule; Rule II: The Payback Rule with a payback period of 2 years; ---Rule I only. Rule II only. Rule I and II. None. "
A) Rule I only
B) Rule II only
C) Rule I and II
d) None
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