Use the following information to answer the question(s)below.
Sarah Palin reportedly was paid a $11 million advance to write her book Going Rogue.The book took one year to write.In the time she spent writing,Palin could have been paid to give speeches and appear on TV news as a political commentator.Given her popularity,assume that she could have earned $8 million over the year (paid at the end of the year)she spent writing the book.
-The IRR of Palin's book deal is closest to:
A)-27.27%.
B)-37.50%.
C)27.27%.
D)37.50%.

Question

Quizplus · Accepted Answer

IRR is the discount rate that makes the NPV of a project equal to zero. In this case, the NPV of Palin's book deal is:NPV = -11 million + 8 million / (1 + IRR)^1Setting NPV = 0 and solving for IRR, we get:IRR = -27.27%

Use the Following Information to Answer the Question(s)below