The owners of a small manufacturing concern have hired a vice president to run the company with the expectation that he will buy the company after five years. For the first $150,000 of profit, the vice president's compensation is a flat annual salary of $50,000 plus 90% of company profits. Beyond the first $150,000 in profits, the vice president's compensation is the salary he receives at $150,000 profit plus 10% of company profits in excess of $150,000. On the following graph, use the purple points (diamond symbols) to plot the vice president's salary as a function of annual profit, for the profits levels of $0, $50,000, $100,000, $150,000, $200,000, $250,000, and $300,000. MANAGER SALARY (Thousands of dollars) 250 225 200 175 150 125 100 75 50 25 50 100 150 200 250 ANNUAL COMPANY PROFIT (Thousands of Dollars) 300 Total VP Salary The vice president has the option to purchase the company after five years. The purchase price for the company is set at 4 times earnings (profit), computed as average annual profitability over the next five years. In five years, the company is expected to be worth $10 million. On the following graph, use the green points (triangle symbols) to plot the vice president's expected profit from buying the company, for average annual profitability levels of $0, $500,000, $1,000,000, $1,500,000, and $2,000,000. PROFIT FROM PURCHASE OF COMPANY (Millions of dollars) 7 6 10 10 500000 1000000 1500000 2000000 ANNUAL COMPANY PROFIT (Dollars) 2500000 Profit from Buying Company