Who earns the return on the investment

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Reference no: EM131027012

You run a company, GizmoNet, that produces gizmos. Gizmos hook onto Nintendo Game Boys (hand-held electronic game players), allowing users to access the Internet using wireless communication protocols. Thus, they turn Game Boys into hand-held web browsers. Your company hires software engineers, who are employed for three periods. In period one, they must train at the company. In this period their total productivity is $10M (million), and training costs are $8M. In periods two and three (after the training), productivity is $17M and $19M, respectively. An engineer who received no training would have productivity of $10M at any other firm in all three periods.

Engineers can quit after the training (and always get a job offer at other firms). If they do so, their productivity at other firms is $2M lower than at GizmoNet in each of the last two periods. Assume no discounting.

c. In an economic sense (rather than accounting), who pays for the training investment, and who earns the return on the investment? Briefly explain.

Reference no: EM131027012

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