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Professor Wendy Smith has been offered the following​ opportunity: A law firm would like to retain...

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Finance

Professor Wendy Smith has been offered the following​opportunity: A law firm would like to retain her for an upfrontpayment of $48,000. In​ return, for the next year the firm wouldhave access to eight hours of her time every month. As analternative payment​ arrangement, the firm would pay Professor​Smith's hourly rate for the eight hours each month. ​ Smith's rateis $535 per hour and her opportunity cost of capital is 15% peryear. What does the IRR rule advise regarding the payment​arrangement? (Hint: Find the monthly rate that will yield aneffective annual rate of 15%​. What about the NPV​ rule?

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