Average annual profitability over the next five years

Assignment Help Business Economics
Reference no: EM132401103

Individual Problems 1-1

The owners of a small manufacturing concern have hired a vice president to run the company with the expectation that she will buy the company after five years. For the first $150,000 of profit, the vice president's compensation is a flat annual salary of $50,000 plus 90% of company profits. Beyond the first $150,000 in profits, the vice president's compensation is the salary she receives at $150,000 profit plus 30% of company profits in excess of $150,000.

On the following graph, use the purple points (diamond symbols) to plot the vice president's salary as a function of annual profit, for the profits levels of $0, $50,000, $100,000, $150,000, $200,000, $250,000, and $300,000.

2.The vice president has the option to purchase the company after five years. The purchase price for the company is set at 4 times earnings (profit), computed as average annual profitability over the next five years. In five years, the company is expected to be worth $10 million.

On the following graph, use the green points (triangle symbols) to plot the vice president's expected profit from buying the company, for average annual profitability levels of $0, $500,000, $1,000,000, $1,500,000, and $2,000,000.

Reference no: EM132401103

Questions Cloud

What would be the most predictable areas of concern : A few months later, you learn that infection rates have nearly doubled during the last quarter within all areas of the organization. How would you put together.
How did the suffrage movement reflect societys expectations : How did the suffrage movement (1848-1920) reflect society's expectations of gender roles? Do you think women's involvement in the suffrage movement enhanced
Calculate the intra-industry trade index : Calculate the intra-industry trade index (pg. 192) for rice (HS 1006) and motor cars (HS 8703) in 2018 for Canada and Japan and the Entire World
Discuss where each type tends to exist : Create a 6- to 8-slide PowerPoint presentation (including a title and reference slide) addressing the following: Discuss where each type tends to exist.
Average annual profitability over the next five years : In five years, the company is expected to be worth $10 million.
Why do firms exists : Why do firms exists? Why are some transactions done within a firm, and some between firms?
Why society should consider womens perspectives : Explain why early 20th Century society should consider women's accomplishments and perspectives related to the selected issue
Why did you include each of the ten elements : Why did you include each of the ten elements? Why is a Code of Ethics an important part of every business from an employer standpoint?
Main determinants of demand : What factors would you suggest to be the main determinants of demand?

Reviews

Write a Review

Business Economics Questions & Answers

  Economics assignment

This document contains various important questions and their appropriate answers in the subject field of Economics.

  Demand and supply curves

Economics is the study of the principles governing the allocation of scarce means among competing ends when the objective of the allocation is to maximize the attainment of the ends.

  Long-run perfectly competitive equilibrium for the firm

Evaluate Government intervene and correct this situation?(a) Explain the concept of a concentration ratio. A rise in the price of magarine Explain the impact of external costs and external benefits on resource allocation long-run perfectly c..

  Supply and demand diagrams

Explain each of the following using supply and demand diagrams,  With the use of a graph, explain how these two programs affect cigarette consumption and the price of cigarettes.

  Case study: fisher-price toys

The case study of the Fisher-Price Toys, Inc., a popular case in basic economics and management from the prestigious Harvard Business School.

  Draw the production possibility curve

Draw the production possibility curve and a. Define consumer surplus and producer surplus.

  Tax revenue

The Australian government administers two programs that affect the market for cigarettes

  Maximize total welfare

How many tickets to sell to maximize total welfare.

  Difference between the cv and the ev

The change in consumer surplus (?CS) is not "theoretically" justifiable like the CV and EV but it continues to be the most widely used measure of consumer welfare change. Explain how this can be reconciled

  Depict von neumann-morgenstern utility index u in a diagram

Depict the von Neumann-Morgenstern utility index u in a diagram

  What is the market solution

What is the market solution (market price and quantity) and What is the total surplus of the society under the market solution

  Calculate gross national product and net national product

Calculate gross national product and net national product

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd