Complete the following and submit it in a Word document. Be sure to show your pr

WRITE MY ESSAY

Complete the following and submit it in a Word document. Be
sure to show your pr

Complete the following and submit it in a Word document. Be
sure to show your process and calculations:
1.   
Assume you have just
retired as the CEO of a successful company. A major publisher has offered you a
book deal. The publisher will pay you $1 million upfront if you agree to write
a book about your experiences. You estimate that it will take three years to
write the book. The time you spend writing will cause you to give up speaking
engagements amounting to $500,000 per year. You estimate your opportunity cost
to be 10%.
o  
Should you accept this
deal? Plot a diagram that measures NPV (on the y-axis) vs. discount rate (on
the x-axis) to solve this problem. (Hint: Have your scale on the
x-axis go to 50% (discount rate)).
o  
Determine the IRR for
this deal. (Hint: IRR is the point at which NPV = 0)
2.   
Suppose you inform the
publisher that it needs to sweeten the deal before you will accept it. The
publisher offers $550,000 advance and $1,000,000 in four years when the book is
published.
o  
Should you accept or
reject the new offer? Again, plot a diagram that measures NVP (on the y-axis)
vs. discount rate (on the x-axis) to solve this problem. (Hint: Have
your scale on the x-axis go to 50% (discount rate)).
o  
Determine the IRRs for
this deal (Hint: There are two IRRs for this problem).
o  
Discuss if the IRR rule
for making budgetary decisions can be used in this case.
3.   
Finally, you are able to
get the publisher to increase your advance to $750,000, in addition to the $1
million when the book is published in four years.
o  
Should you accept or
reject this new offer? Again, plot a diagram that measures NVP (on the y-axis)
vs. discount rate (on the x-axis) to solve this problem. (Hint: Have
your scale on the x-axis go to 50% (discount rate)).
o  
Determine the IRR for
this deal.
4.   
State three conclusions
regarding the use of IRR vs. NPV that you can make from questions 2-4. Which is
the stronger method to use (IRR or NPV), and why?

WRITE MY ESSAY