Casey Bertholt graduated from State U with a major in accounting five years ago. She ob¬

tained a position with a well-known public accounting firm upon graduation and has be¬

come one of their outstanding performers. In the course of her work, she has developed nu¬

merous contacts with business firms in the area. One of them, Litton, Inc., recently offered her a position as head of their Financial Services Division. The offer includes a salary of

$40,000 per year, annual bonuses of 1% of divisional net income, and a stock option for 10,000 shares of Litton stock to be exercised at $12 per share in two years. Last year the Fi¬

nancial Services Division earned $1,110,000. This year it is budgeted to earn $1,600,000. Lit¬

ton stock has increased in value at the rate of 15% per year over the past five years. Casey currently earns $55,000.

Required:

Advise Casey on the relative merits of the Litton offer.