Answer to Question #308668 in Finance for sms

Question

1.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 £1,700 in the first year, and grew steadily by 4.9% per year. Her royalty rate is 18% of revenue. Recently, she hired an auditor who discovered that the publisher had been underreporting revenues. The book had actually earned 10% more in revenues than had been reported on her royalty statements. Assuming the publisher pays an interest rate of 4.7% on missed payments, how much money does the publisher owe Diana?

Answer 1

In the first year, the publisher paid:

$1700\times0.18=306$

taking into account the increase in income:

$((1700\times0.1)+1700)\times0.18=336.6$

in the second year, the publisher had to pay:

$((1700\times0.1)+1700)\times0.18=336.6$

For two years:

336.6+336.6=673.2

in the second year, the publisher paid:

$((1700\times0.049)+1700)\times0.18=320.99$

For two years paid:

306+320.99=626.99

Difference in:

673.2-626.99=57.21