## (Solved) Ten years ago Diana Torres wrote what has become the leading Tort textbook. She has been receiving royalties based on revenues reported by the...

Ten years ago Diana Torres wrote what has become the leading Tort textbook. She has been receiving royalties based on revenues reported by the publisher. These revenues started at \$1.6 million in the firstâ€‹ year, and grew steadily by 5.5% per year. Her royalty rate is 18% of revenue.â€‹ Recently, she hired an auditor who discovered that the publisher had been under reporting revenues. The book had actually earned 10% more in revenues than had been reported on her royalty statements.

A. Assuming the publisher pays an interest rate of 4.4% on missedâ€‹ payments, how much money does the publisher oweâ€‹ Diana?Â Â The present value of missing payments for the 10â€‹-year period is Â â€‹\$Â Â ____________â€‹(Round to the nearestâ€‹ dollar.)Â Â The publisher owes Diana â€‹\$Â Â Â Â _____________

B. The publisher is short ofâ€‹ cash, so instead of paying Diana what isâ€‹ owed, the publisher is offering to increase her royalty rate on future book sales. Assume the book will generate revenues for an additional 2020 years and that the current revenue growth will continue. If Diana would otherwise put the money into a bank account paying interest of 5.1%â€‹, what royalty rate would make her indifferent between accepting an increase in the future royalty rate and receiving the cash owed today.

The new royalty rate must be __________%

Solution details:
STATUS
QUALITY
Approved

This question was answered on: Sep 05, 2019

Solution~000200225940.zip (25.37 KB)

This attachment is locked

We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free solution (Deadline assured. Flexible pricing. TurnItIn Report provided)

STATUS

QUALITY

Approved

Sep 05, 2019

EXPERT

Tutor