Professor Wendy Smith has been offered the following
opportunity: A law firm would like to retain her for an upfront
payment of $50,000. 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 the eight hours each month. Smith's rate
is $555 per hour and her opportunity cost of capital is 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% .) 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 pa
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Professor Wendy Smith has been offered the following opportunity: A law firm would like to retain her for an upfront pa
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