Business, 21.01.2021 22:50 alanahjones63

The owner's of a small manufacturing concern have hired a manager to run the company with the expectation that he will buy the company after 5 years. Compensation of the new vice president is a flat salary pluss 75% of the first $150,000 profit, then 10% of profit over $150,000. Purchase price for the company is set at 4.5 times earnings (profit), computed as average annual profitability over the next five years. a. Does this contract align the incentives of the new vice president with the profitability goals of the owners?
b. Redesign the contract to better align the incentives of the new vice president with the profitability goals of the owners.

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The owner's of a small manufacturing concern have hired a manager to run the company with the expect...