"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 $30000 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

Answer rating: 100% (QA)

Rule I The Net Present Value NPV rule compares the present value of the cash inflows to the present ... View the full answer