Professor Wendy Smith has been offered thefollowing opportunity: A law firm would like to retain her for anupfront payment of $49,000. In return, for the next year the firmwould have access to eight hours of her time every month. As analternative payment arrangement, the firm would payProfessor Smith's hourly rate for the eight hours eachmonth. Smith's rate is $545 per hour and her opportunity cost ofcapital is 15% per year. What does the IRR rule advise regardingthe payment arrangement? (Hint: Find the monthly rate that willyield an effective annual rate of 15%.) What about the NPV rule?The annual IRR is %. (Round to two decimal places.)

>Please refer to the below spreadsheet for calculation and answer. Cell reference was also…

Answered: Professor Wendy Smith has been offered…

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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Similar questions

Professor Wendy Smith has been offered the following deal: 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 8 hours of her time every month. Smith’s rate is $550 per hour and her opportunity cost of capital is 15% (EAR). What does the IRR rule advise regarding this opportunity? What about the NPV rule?
Professor Wendy Smith has been offered the following deal: A law firm would like to retain her for an upfront payment of $ 58 comma 000. In return, for the next year, the firm would have access to 8 hours of her time every month. Smith's rate is $ 627 per hour, and her opportunity cost of capital is 16% (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?
Marian Plunket owns her own business and is considering an investment. If she undertakes the investment, it will pay $4,760 at the end of each of the next 3 years. The opportunity requires an initial $1,190 investment of plus an additional investment at the end of the second year of $5,950 What is the NPV of this opportunity if the interest rate is per year? Should Marian take it? What is the NPV of this opportunity if the interest rate is 2.4% per year? The NPV of this opportunity is $ (Round to the nearest cent.)
Ms. Adams has received a job offer as an administrative assistant. Her base salary will be $50,000. She will receive her first annual salary payment one year from the day she begins to work. In addition, she will get an immediate $10,000 bonus for joining the company. Her salary will grow at 4 percent each year and each year she will receive a bonus equal to 10% of her salary. Ms. Adams is expected to work for 30 years. What is the present value of the offer if the appropriate discount rate is 10% (EAR)?
A consumer faces the following decision. She can buy a computer for $1050 and pay $10 per month for Internet access for three years, or she can receive a $500 rebate on the computer (so that it's cost is $550) but agree to pay $25 per month for three years for Internet access. For simplication, assume that the consumer pays the access fees yearly. (i.e., $10 per month= $120 per year, at the beginning of each year). a. What should the consumer do if the interest rate is 6 percent? b. What if the interest rate is 13 percent? c. At what interest rate would the consumer be indifferent between the two options in percent?
An employee is earning P 18,000 a month and he can only afford to purchase a car which will require a down payment of P 85,000 and a monthly amortization of 30% of his monthly salary. What would be the maximum cash value of a car he can purchase if the seller will agree to a down payment of P 85,000 and the balance payable in four years at 18% per year payable in monthly basis. The first payment will be due at the end of the first month.
Davenport Inc. offers a new employee two options. First, the employee can receive a one-time signing bonus at the date of employment. Second, the employee can take $26,000 at the date of employment and another $46,000 two years later. Assuming the employee's time value of money is 11% annually, what single payment in the first option would be equal to the total of the payments in the second option? (FV of $1, PV of $1, FVA of $1, and PVA of $1). (Use appropriate factor(s) from the tables provided.) Multiple Choice $25,000 $72,000 $67,102 $63,335
You are assiting a newly hired employee. You begin explaning the process of utilizing excel to finance properties. Consider the following. A realator has a house on sale for $640,000. If possible you believe you can finance the home for $300,000 for 20 years at a 3% interest rate. What would the monthly principle and interest payment be for the acquird loan? Calculate using the PV funtion in excel. How would you caluclate this in Excel using the PV function? Rate: Nper: Pmt: FV: Type:
An employee is earning P 18,511 a month and he can only afford to purchase a car which will require a down payment of P 85,000 and a monthly amortization of 30% of his monthly salary. What would be the maximum cash value of a car he can purchase if the seller will agree to a down payment of P 82,000 and the balance payable in four years at 18% per year payable in monthly basis. The first payment will be due at the beginning of the first month.
You have been hired as a benefit consultant by Jean Honore, the owner of Pina Angels. She wants to establish a retirement plan for herself and her three employees. Jean has provided the following information. The retirement plan is to be based upon annual salary for the last year before retirement and is to provide 50% of Jean's last-year annual salary and 40% of the last-year annual salary for each employee. The plan will make annual payments at the beginning of each year for 20 years from the date of retirement. Jean wishes to fund the plan by making 15 annual deposits beginning January 1, 2025. Invested funds will earn 11% compounded annually. Information about plan participants as of January 1, 2025, is as follows. Jean Honore, owner: Current annual salary of $51,900; estimated retirement date January 1, 2050. Colin Davis, flower arranger: Current annual salary of $37,230; estimated retirement date January 1, 2055. Anita Baker, sales clerk: Current annual salary of $19,700;…
You have been hired as a benefit consultant by Jean Honore, the owner of Sweet Angels. She wants to establish a retirement plan for herself and her three employees. Jean has provided the following information. The retirement plan is to be based upon annual salary for the last year before retirement and is to provide 50% of Jean's last-year annual salary and 40% of the last-year annual salary for each employee. The plan will make annual payments at the beginning of each year for 20 years from the date of retirement. Jean wishes to fund the plan by making 15 annual deposits beginning January 1, 2025. Invested funds will earn 11% compounded annually. Information about plan participants as of January 1, 2025, is as follows. Jean Honore, owner: Current annual salary of $49,990; estimated retirement date January 1, 2050. Colin Davis, flower arranger: Current annual salary of $37.190; estimated retirement date January 1, 2055. Anita Baker, sales clerk: Current annual salary of $20,900;…
Patricia was receiving rental payments of $2, 000 at the beginning of every month from the tenants of her commercial property. What would be the value of her property in the market if she wants to sell it, assuming a market capitalization rate of 6.50% compounded annually?

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