Both the compensation theory and empirical research suggest that boards use a diverse set of performance measures, such as net income versus price, financial versus non-financial measures, when designing executive compensation contracts. Some recent studies find that in setting executive bonus plans, boards also select alternative accounting performance measures other than bottom-line net income. These performance measures include sales, operating income, and earnings before interest, taxes, depreciation, and amortization (EBITDA), all of which exclude certain expenses from net income. In specific, recent studies find that, in designing the executive bonus plans, (1) for firms with more volatile depreciation expense, boards are more likely to use EBITDA as the performance measure. (2) at firms with larger intangible investments and more growth opportunities, boards tend to select sales or EBITDA as performance measures. a. Explain for each of the two scenarios, (1) and (2), why boards would choose sales or EBITDA rather than net income as performance measures. b. How would these performance measures affect compensation risk and the length of manager decision horizon