Calculation of the manager

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The owners of a small manufacturing company have hired a manager to run the company with the expectation that 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 profit, and then 5% 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 manager.

Reference no: EM132162611

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