Question content area top

Part $1$

Professor Wendy

SmithSmith

has been offered the following$$ deal: 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

$88$

hours of her time every month.

SmithSmith$\text{'}$s

rate is

$ $524$$$524$

per$$ hour, and her opportunity cost of capital is

$14\%14\%$

$($equivalent annual$$ rate, EAR$).$ What is the IRR$($annual$)?$ What does the IRR rule advise regarding this$$ opportunity? What is the$$ NPV$?$ What does the NPV rule say about this$$ opportunity?