Nole is the CEO of Witter Corp.Nole is considering a few changes at Witter.

Change 1: Fire half the employees. Nole expects this will increase profits this year by $10 million.

Change 2: Revamp the firms software interface. Nole expects this will result in higher customer satisfaction leading to more subscribers and higher profits (by $2 million) each year for the foreseeable future. Nole expects the stock price will rise from $100 per share to $120 per share when Change 2 is announced and implemented. Nole would have to work more hours per week in order to accomplish Change 2.

Change 3: Buy a corporate jet. Nole expectsthis to cost Witter $5 millionper year in terms of all costs associated with the jet. Nole and family will also be able to use the jet for vacations.

1. Suppose Nole does not own any of Witters stock.
   1. Suppose Nole is compensated with a fixed salary of $1 million per year. Which of the above changes is most attractive to Nole? Why, show numbers if possible.
   2. Nole is planning on retiring in 2 years. Suppose Nole is compensated with a fixed salary of $0.5 million per year and a bonus of 10% of profits. Which of the above changes is most attractive to Nole? Why, show numbers if possible.

2. Suppose Nole owns 1 million shares of Witters stock. How would your answers to 1a and 1b change?

3. Which of the changes listed are consistent with shareholder wealth maximization? Which are consistent with stakeholder satisfaction? Discuss.
4. Which of the changes is most likely a principalagent problem? Discuss.