3. The Top Dollar Co. is trying to decide whether to use an assessment center to select middle managers for its consumer products operations.

The following information has been determined: variable costs are 0.10, corporate taxes are 44 percent, the discount rate is 9 percent, the ordinary selection procedure costs $700 per candidate, the assessment center costs $2,800 per candidate, the standard deviation of job performance is $55,000, the validity of the ordinary procedure is 0.30, the validity of the assessment center is 0.40, the selection ratio is 0.20, and the average tenure as a middle manager is 3 years. The program is designed to last 6 years, with 20 managers added each year. Beginning in year 4, however, one cohort separates each year until all hires from the program leave.

Use Equation 10.6 in this chapter to determine whether Top Dollar Co.

should adopt the assessment center to select middle managers. What payoffs can be expected in total, per selectee, and per selectee in the first year?