The owners of Plastic Forming and Molds, a small manufacturing business, have hired a VP to run the company with the expectation that she will buy the company after five years. The new vice president's compensation is a flat salary plus 55% of first $140,000 of profit, and then 15% of profit over $140,000. The purchase price for the company is set as 3 times earnings (profit), computed as average annual profitability over the next five years. Does this contract align the incentives of the new vice president with the goals of the owners? Why or why not? Please use marginal thinking in your answer:

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