Mary Is in Contract Negotiations with a Publishing House for Her

question 26

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) Rule II and III
• D) Rule I and II

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Definitions:

Backstage

In sociological and performance terms, the regions where individuals prepare and rehearse before entering the 'front stage' where they perform their social roles.

Superego

In psychoanalytic theory, the part of the human psyche that represents internalized societal standards, morals, and ideals, acting as a counterbalance to primal desires.

Conscience

An inner feeling or voice viewed as acting as a guide to the rightness or wrongness of one's behavior.

Misbehavior

Actions or behaviors that violate social norms or rules.