Students, Teachers and Administration (STaN) Partners, have superceded Kohlberg, Kravis and Roberts as the world's premier private equity firm.
STaN raises capital, and in turn invests this capital in a diversified industrial portfolio. Their goal is to provide a 16% rate of return
on their company's assets (ROA). STaN receives an annual management fee of $500k for overseeing/managing the portfolio.
Currently, STaN is involved in 3 companies: DNA Strands (a Biotech firm), Pizza Pasta (a restaurant chain), and Professors-on-call (an agency that helps universities place
adjunct faculty). The managers running these companies are paid a salary and a significant bonus, based on Net Income (after tax profits). The following table outlines
some significant financial and employee related information:
				STaN Equity Partners
				$ amounts in millions
					DNA Strands	Pizza Pasta	Professors-on-Call
				WACC	19%	16%	10%
				SLD Equity Management Fee	0.25	0.25	0.25
				Number of Employees	200	250	50
				Interest Expense	5	2.5	1
				Income Tax Rate	40%	40%	40%
				Operating Expenses	40	50	15
				Revenues	100	90	35
				Total Assets	200	100	5
Dan is the current manager of Professors-on-Call. He is worried because his Net Income appears to be far below the managers of DNA Strands and Pizza Pasta.
Utilizing Residual Income/EVA calculations, please determine which manager is doing the best. According to Residual Income/EVA, is Dan doing such a bad job?
Should STaN continue to base its bonus structure on Net Income? Please write a short proposal on what they should do.