M&B3 3rd Edition by Dean Croushore

Exercise 13

Your newest book, "50 Shades of Gray Recession Bars," is being considered by a publishing house, which offers you an advance of $100,000 today, plus $50,000 at the end of each of the next two years. Call this Plan A.
a What is the present value of the payments from the publisher, given your rate of discount is 2 percent Show your work. You may round to the nearest dollar.
Your literary agent thinks you should make a counteroffer, in which you receive nothing today but receive $3 at the end of each of the next two years for each book you sell during the year. Call this Plan B.
b If you think you will sell 35,000 books a year during each of the next two years, what is the present value of your earnings under Plan B Show your work. You may round to the nearest dollar.
c If your publisher thinks you will sell 30,000 books a year during each of the next two years, what is the present value of your earnings under Plan B Show your work. You may round to the nearest dollar.
d Which plan is best for you, based on your expected sales Which plan is best for your publisher, based on its expected sales Which plan will you and your publisher agree to, or will you have to negotiate further Explain.