1. What is the Expected Present Value (EPV) of the risky worker if discount rate is 0.1? All other parameters are same as the base case

2. What is the Expected Present Value (EPV) of the risky worker if firing cost is 1000? All other parameters are same as the base case.

3. What is the Expected Present Value (EPV) of the risky worker if probability of good is 0.5? All other parameters are same as the base case.

4. For what cost of firing the Expected Present Value (EPV) of the risky worker and safe worker will be the same? All other parameters are same as the base case.

5. For what discount rate the Expected Present Value (EPV) of the risky worker and safe worker will be the same? All other parameters are same as the base case.

Hiring Risky Workers - Spreadsheet Example In this example, "bad workers are detected after ONE period Discount Rate (1) - 0 Quit Rate (0) 0 8 Firing Cost - 0 Safe Worker Characteristics: "Risky"Worker Characteristics: actual base case actual base caso Sales: 200 200 Sales if Bad 0 0 Sales if Good: 1000 1000 Probability (Good) 0.2 0.2 Salary 100 100 Salary: 100 100 Expected Sales 200 200 Safe Worker (1) Risky Worker (2) (3) (4) (5) (6) (7) (1) (2) (3) (5) (8) (7) Share of Sales. EPV/Sales- E(Sales - Sales- EPV/Sales- workers Salary Salary) SalarySalary-FC Salary-FC) Sales who haven't after after Sales Salary Sales Salary Firing after after Year Sales Salary Salary quit (R) quits quits If Bad i Bad Good If Good Costs) quita 1 200 100 100 1.000 100.0 100.0 0 100 1000 100 100 100.0 100.0 2 100 100 1.000 100.0 100.0 0 0 1000 100 180 180.0 3 180.0 200 100 100 1.000 100.0 100.0 0 0 1000 100 180 180.0 180.0 4 200 100 100 1.000 100.0 100.0 0 0 1000 100 180 1800 180.0 5 200 100 1.000 100.0 100.0 0 0 1000 100 180 1800 180.0 6 200 100 100 1.000 100.0 100.0 0 0 1000 100 180 180.0 180.0 7 200 100 100 1.000 100.0 0 0 1000 100 180 180.0 180.0 8 200 100 100 1.000 100.0 100.0 0 0 1000 100 180 180.0 180.0 9 200 100 100 1.000 100.0 100.0 0 0 1000 100 180 180.0 180.0 10 200 100 100 1.000 100.0 100.0 0 0 1000 100 180 180.0 180.0 SUM 2000 1000 1000 1000 1000 0 100 10000 1000 1720 1720 1720 Note: All magnitudes are in thousands of dollars. Dase case parameter values are in bold. quits 200 100 100.0 ious Hiring Risky Workers - Spreadsheet Example In this example, "bad workers are detected after ONE period Discount Rate (1) - 0 Quit Rate (0) 0 8 Firing Cost - 0 Safe Worker Characteristics: "Risky"Worker Characteristics: actual base case actual base caso Sales: 200 200 Sales if Bad 0 0 Sales if Good: 1000 1000 Probability (Good) 0.2 0.2 Salary 100 100 Salary: 100 100 Expected Sales 200 200 Safe Worker (1) Risky Worker (2) (3) (4) (5) (6) (7) (1) (2) (3) (5) (8) (7) Share of Sales. EPV/Sales- E(Sales - Sales- EPV/Sales- workers Salary Salary) SalarySalary-FC Salary-FC) Sales who haven't after after Sales Salary Sales Salary Firing after after Year Sales Salary Salary quit (R) quits quits If Bad i Bad Good If Good Costs) quita 1 200 100 100 1.000 100.0 100.0 0 100 1000 100 100 100.0 100.0 2 100 100 1.000 100.0 100.0 0 0 1000 100 180 180.0 3 180.0 200 100 100 1.000 100.0 100.0 0 0 1000 100 180 180.0 180.0 4 200 100 100 1.000 100.0 100.0 0 0 1000 100 180 1800 180.0 5 200 100 1.000 100.0 100.0 0 0 1000 100 180 1800 180.0 6 200 100 100 1.000 100.0 100.0 0 0 1000 100 180 180.0 180.0 7 200 100 100 1.000 100.0 0 0 1000 100 180 180.0 180.0 8 200 100 100 1.000 100.0 100.0 0 0 1000 100 180 180.0 180.0 9 200 100 100 1.000 100.0 100.0 0 0 1000 100 180 180.0 180.0 10 200 100 100 1.000 100.0 100.0 0 0 1000 100 180 180.0 180.0 SUM 2000 1000 1000 1000 1000 0 100 10000 1000 1720 1720 1720 Note: All magnitudes are in thousands of dollars. Dase case parameter values are in bold. quits 200 100 100.0 ious