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The owners of a small manufacturing concern have hired a manager to run the company with the expectation that (s) he will buy the company after five years. The goal of the owners in making this hire is to find the appropriate manager that will increase profits substantially. Compensation of the new manager is a flat salary plus 50% of first $200,000 of profit, and then 5% of profit over $200,000. Purchase price for the company is set as 4.5 times net earnings (profit), computed as average annual profitability (prior to calculation of the managers bonus) over the next five years.
(a) Does the bonus structure for the manager provide the manager with the appropriate incentive to increase profits beyond the first $200,000 ? Explain briefly.
(b) Is it a good idea to link the purchase price of the company to the earnings (profit) of the company. Given this linkage, what do you think the manager will try to do?
(c) Does this contract align the incentives of the new manager with the (current)goals of the owners?
Participate in a discussion with your classmates regarding where you see the U.S. economy in its business cycle right now, as based on the economic concepts in the textbook. Now that we learned that the real business cycle results from fluctuations i..
The marginal cost of the In Focus division for making the lenses is given by the equation MCl = 0.30 + 0.0004Ql. Each camera requires one lens. How many cameras will Camco produce and what price will be charged for each?
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In terms of the law of contract can they sue Mr Patel for the cost of R17 000.00 that they are now required to pay to rectify the errors. Assume that the electrical compliance boards report is correct. Do you think Mr Patel has any defence to the cla..
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consider the production functionq 4k 34 l 14a. find the gradient of qb. find the hessian of qc. denote the initial
Different products have different elasticities. Heart medication, for example, is inelastic, and corn is elastic.
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