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Pat the statistician was saddened at the news that her aunt, Tina Turner, just passed away. Tina, recognizing her own mortality and wanting to be
Pat the statistician was saddened at the news that her aunt, Tina Turner, just passed away. Tina, recognizing her own mortality and wanting to be proactive in assisting in the settlement of her estate, had asked Pat to develop a statistical model of expected cashflows from her song royalties. Pats modelling of royalties for recently deceased non-superstar musicians, estimates that royalties will double in the first year after death, return to the initial time zero level in year two, and then decrease by 15 percent per year thereafter. If we assume: The modelled cashflows are correct, all cashflows will be paid at the end of the year, The risk-adjusted discount rate should be 9.5 percent, Last years royalties were $200,000. What would the value of these song royalties be worth
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