Professor Wendy Smith has been offered the following opportunity: A law firm would like to retain her for an upfront payment of

$ 50 comma 000$50,000.

In return, for the next year the firm would have access to eight hours of her time every month. As an alternative paymentarrangement, the firm would pay Professor Smith's hourly rate for the eight hours each month. Smith's rate is

$ 545$545

per hour and her opportunity cost of capital is

15 %15%

per year. What does the IRR rule advise regarding the payment arrangement? (Hint: Find the monthly rate that will yield an effective annual rate of

15 %15%.)

What about the NPV rule?

Professor Wendy Smith has been offered the following opportunity: A law firm would like to retain her for an upfront payment of S50,000. In return, for the next year the firm would have access to eight hours of her time every month. As an alternative payment arrangement, the firm would pay Professor Smith's hourly rate for e eight hours each month. Smith's te s S545 per hour and her opportunity cost of capital is 15% per year what does the IRR le advise garding the payment arrangement? Hint: Find the monthly rate that will yield an effective annual rate of 15%.) What about the NPV rule? The IRR is %. (Round to two decimal places.) The IRR rule advises: e best choica below.) O A. Since the IRR is less than the cost of capital, 15%, Smith should turn down this opportunity. B. C. O D. Since the IRR is less than the cost of capital, 15%, Smith should accept this opportunity. with an IRR of 15% and with Smith's cost of capital at B.79%, according to the IRR rule, she should reject this opportunity None of the above. The NPV is $LI (Round to the nearest dollar.) OA. B. C. Even though the NPV is positive, the IRR is high enough to accept the upfront retainer Since the NPV is negative, the correct decision is to accept the upfront retainer. Even though the NPV is negative, the IRR is below the cost of capital, so the correct decision is to reject the upfront payment. O D. None of the above