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has been the rtunity. A law i 10 tain ner ayment of $48,000. In return, for the next year the firm would have access to eight hours of her time n alternative payment arrangement, the firm would pay Professor Smith's hourly rate for the eight h Smith's rate is $535 per hour and her opportunity cost of capital is 15% per year. What does the IRR egarding the payment arrangement? (Hint: Find the monthly rate that will yield an effective annual ra bout the NPV rule? The annual IRR is 13.44 %. (Round to two decimal places.) The IRR rule advises: (Select the best choice below.)

has been the rtunity. A law i 10 tain ner ayment of $48,000. In return, for the next year the firm would have access to eight hours of her time n alternative payment arrangement, the firm would pay Professor Smith's hourly rate for the eight h Smith's rate is $535 per hour and her opportunity cost of capital is 15% per year. What does the IRR egarding the payment arrangement? (Hint: Find the monthly rate that will yield an effective annual ra bout the NPV rule? The annual IRR is 13.44 %. (Round to two decimal places.) The IRR rule advises: (Select the best choice below.)

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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The NPV is? Round to nearest dollar

Professor Wendy Smith has been offered the following opportunity: A law firm would like to retain her for an upfront payment of $48,000. 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 $535 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? The annual IRR is 13.44 %. (Round to two decimal places.) The IRR rule advises: (Select the best choice below.) OA. With an IR of 15% and with Smith's cost of capital at 13.44%, according to the IRR rule, she should reject this opportunity. B. Since the IRR is less than the cost of capital, 15%, Smith should turn down this opportunity. C. Since the IRR is less than the cost of capital, 15%, Smith should accept this opportunity. D. None of the above. The NPV is $ (Round to the nearest dollar.)
Transcribed Image Text:Professor Wendy Smith has been offered the following opportunity: A law firm would like to retain her for an upfront payment of $48,000. 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 $535 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? The annual IRR is 13.44 %. (Round to two decimal places.) The IRR rule advises: (Select the best choice below.) OA. With an IR of 15% and with Smith's cost of capital at 13.44%, according to the IRR rule, she should reject this opportunity. B. Since the IRR is less than the cost of capital, 15%, Smith should turn down this opportunity. C. Since the IRR is less than the cost of capital, 15%, Smith should accept this opportunity. D. None of the above. The NPV is $ (Round to the nearest dollar.)
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