Bill Clinton reportedly was paid$12million 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 $9.00 million per year​ (paid at the end of the​ year) speaking instead of writing. Assume his cost of capital is 10.0% per year.
a.Based on the above cash​ flows, how many IRRs does the opportunity​ have? Does the IRR rule give the right answer in this​ case?
b. Assume now that once the book is​ finished, it is expected to generate royalties of
$4.80
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. How many IRRs are there in this​ case? Does the IRR rule work in this​ case?
Question content area bottom
Part 1
a. Based on the above cash​ flows, how many IRRs does the opportunity​ have? ​ (Select the best choice​ below.)
A.
One IRR
B.
Two IRRs
C.
Three IRRs
D.
Four IRRs