The owners of a small manufacturing concern have hired a vice president to run the company with the expectation that he 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 he receives at $150,000 profit plus 10% of company profits in excess of $150,000. How do you plot the profit of buying the company as a function of annual profit when you assume the company will be worth 10 million in five years?
The owners of a small manufacturing concern have hired a vice president to run the company with the expectation that he 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 he receives at $150,000 profit plus 10% of company profits in excess of $150,000. How do you plot the profit of buying the company as a function of annual profit when you assume the company will be worth 10 million in five years?
Chapter17: Capital And Time
Section: Chapter Questions
Problem 17.6P
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The owners of a small manufacturing concern have hired a vice president to run the company with the expectation that he 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 he receives at $150,000 profit plus 10% of company profits in excess of $150,000.
How do you plot the profit of buying the company as a function of annual profit when you assume the company will be worth 10 million in five years?
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