Mary Is in Contract Negotiations with a Publishing House for Her

Multiple Choice

Mary is in contract negotiations with a publishing house for her new novel.She has two options.She may be paid $100,000 up front,and receive royalties that are expected to total $26,000 at the end of each of the next five years.Alternatively,she can receive $200,000 up front and no royalties.Which of the following investment rules would indicate that she should take the former deal,given a discount rate of 8%?

A) Rule I only
B) Rule III only
C) Rules II and III
D) Rules I and II
E) Rules I and III