The owners of a small manufacturing concern have hired a vice president to run the company with the expectation that she 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 she 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 prot, for the prots levels of $0, $50,000, $100,000, $150,000, $200,000, $250,000, and $300,000. 250 225 Total VP Salary to o o '4 tn 01 o N In 100 N U! MANAGER SALARY (Thousands of dollars) a. O N U! O 50 100 150 200 250 300 ANNUAL COMPANY PROFIT (Thousands of Dollars) 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 (prot), computed as average annual profitability over the next five years. In five years, the company is expected to be worth $5 million. 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 (prot), computed as average annual profitability over the next five years. In five years, the company is expected to be worth $5 million. On the following graph, use the green points (triangle symbols) to plot the vice president's expected prot from buying the company, for average annual protability levels of $0, $250,000, $500, 000, $750,000, and $1,000,000. A Prot from Buying Company PROFIT FROM PURCHASE OF COMPANY (Millions of dollars) 0 250000 500000 750000 1000000 1250000 ANNUAL COMPANY PROFIT (Dollars)