Discuss building a pipeline stretches across united states

Assignment Help Microeconomics

Reference no: EM133200935

Assignment:

Oil Company X is a large oil refinery which has been expanding and taking on new investment projects. Recently, they have considered building a pipeline that stretches across the United States, from Canada to New Orleans.

The Board is in the process of hiring a new CEO for the firm. They are concerned about the problem of moral hazard and want to know how they can reduce or eliminate this via contract. They have tasked you, a team member in the Cost Department, with analyzing the following possible payment systems for the new CEO:

Fixed fee: The new CEO will receive a fixed wage.

Profit sharing: The new CEO receives 15% of the firm's profit, with no wage. The current value of the firm's profit, multiplied times 0.15, is equivalent to the fixed fee wage in option 1.

1. Stock Options: The new CEO receives a base salary, with additional stock options tied to total profits. The base salary is 10% lower than the fixed fee from option 1, with the additional 10% given in stocks.

2. Bonuses: The new CEO receives a base salary, with an additional stock bonus which is tied to total revenues. The base salary is 10% lower than the fixed fee from option 1, with the additional 10% given as a bonus tied to the total revenue from the prior year.

3. Stock Options and Bonus: The new CEO receives a base salary, with additional stock options tied to total profits. The base salary is 10% lower than the fixed fee from option 1, with an additional 5% given in stocks and 5% given in the form of a bonus.

Reference no: EM133200935

Questions Cloud

Types of oligopolies : Discussing different types of oligopolies and providing examples of each. Utilize at least 3 outside reputable resources.

How to plan for the management of communications : Explain the major concepts associated with negotiation, including communication in negotiation; change management; decision-making; conflict resolution;

Discussion questions for walmart supercenters minicase : 1. Do you feel the entry of a Walmart Supercenter in a small trade area (

Use f-irac to analyze steel products liability to john : Glendale Community College - Develop a complete F-IRAC the prompts provided and Central to the determination of this issue was whether

Discuss building a pipeline stretches across united states : Recently, they have considered building a pipeline that stretches across the United States, from Canada to New Orleans. Rasmussen College.

Do you feel that sponsorship made any sense in first place : In your introductory paragraphs be sure to provide some brief information about the case. Do you feel that this sponsorship made any sense in the first place?

Relationship between business and sustainability : What is the relationship between business and sustainability? and Why business should care about sustainability? Discuss, analyze, and provide examples to suppo

Key players for federal healthcare policymaking : Identify and discuss the role of the key players for federal healthcare policymaking and what role they play?

How will affect claras tax return in 2020 : Southern New Hampshire University - Assuming her AGI is the same in 2020 as in 2019, how will this affect Clara's tax return in 2020

User Account

All Pages