1. Individual Problems 1-1

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 80% 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 30% of company profits in excess of $150,000.

On the following graph, use the purple points (diamond symbols) to plot the vice president's salary as a function of annual profit, for the profits levels of $0, $50,000, $100,000, $150,000, $200,000, $250,000, and $300,000.

250 225 Total VP Salary 200 175 150 125 MANAGER SALARY (Thousands of dollars) 100 75 50 25 0 50 100 150 200 250 300 0 ANNUAL COMPANY PROFIT (Thousands of Dollars)10 Profit from Buying Company PROFIT FROM PURCHASE OF COMPANY (Millions of dollars) A A 500000 1000000 1500000 2000000 2500000 ANNUAL COMPANY PROFIT (Dollars)