The owner of a small software development company is looking forward to retirement. He hired a new Vice President to run the company with the expectation she will buy it in 3 years. Once the new Vice President starts, the owner would remain involved only on a limited basis, thinking it was time for new ideas and leadership to significantly increase profits. The annual profitability has been between $300,000 and $350,000 over the most recent years. Compensation for the for new Vice President is a flat salary of $80,000, plus 60% of the first $300,000 of annual profit, and 10% of the annual profit over $300,000, all prior to deducting her compensation. Purchase price for the company is set at 4 times the profit of year 3, when she is expected to purchase the company. The owner thought offering too high of a base salary would discourage the growth he was looking for. Given the description above, respond to/address the following: 1) What economic principle/concept identified in chapter 1 relate to this case, and how is it related? 2) Calculate the new Vice Presidents earnings at a profit of $300,000, $400,000, and $500,000 prior to deducting her compensation from profits. 3) What would be the purchase price of the business at the end of year 3 if profits were $400,000, $600,000, and $800,000. Assume the new VPs earnings are already accounted for in the profits noted.