A divisional manger, John James, expects to retire in three years. John is paid a fixed salary plus 10 percent of his divisions profits. Make the unrealistic assumption that John cares only about cash compensation. He can spend $200,000 on process improvements this year and that will yield $125,000 of cost savings for each of the following four years.

Use Excel and show all workuse formulas where useful

Required:

1. Illustrate the case flows for seven years.
2. Should John James accept the project; why?
3. What are the short-term consequences of rejection of this project.
4. Illustrate the case flows for the new manager for years 4-7 if the project is accepted.