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Shareholders of Jimmy's Motors, Inc., a Toledo-based firm, have recently noticed that Jimmy Johnson, the firm's CEO, has been undertaking projects that may generate the
Shareholders of Jimmy's Motors, Inc., a Toledo-based firm, have recently noticed that Jimmy Johnson, the firm's CEO, has been undertaking projects that may generate the firm a negative Net Present Value, which may harm the firm's value. Shareholders would like to redesign Johnson's compensation such that he will have an incentive to make decisions that will maximize the firm's value. What would be the best option for Jimmy's Motors to give Johnson an incentive to make decisions that will maximize the firm's value, and why? The best option will be to give Browning stock grants, since doing so will align Browning's personal wealth with the firm's market value. The best option will be to give Browning cash bonus, since doing so will provide Browning with extra cash he will receive regardless of volatilities in the firm's performance. The best option will be to give Browning cash bonus, since doing so will align Browning's personal wealth with the firm's market value. The best option will be to give Browning stock grants, since doing so will provide Browning with extra cash he will receive based on the level of volatilities in the firm's performance
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