Professor Wendy Smith has been offered the followingopportunity: A law firm would like to retain her for an upfront payment of $50,000. Inreturn, 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 ProfessorSmith's hourly rate for the eight hours each month. Smith's rate is $540per hour and her opportunity cost of capital is 15%per year.

What does the IRR rule advise regarding the paymentarrangement? (Hint: Find the monthly rate that will yield an effective annual rate of 15%.)What about the NPVrule?