Your firm has 1,200 engineers who on average each contribute $240,000 to the annual revenue of the company and receive an average annual salary of $120,000.

1. What is the current annual revenue of the firm?

2. What is the current operating profit of the firm?

The first candidate for the CEO position, Jane Doe, successfully increased the productive output of engineering employees at her last firm by 5%, and is asking for total annual compensation of $3,500,000 and a three year contract.

3. What is the Present Cost of Jane Does three year employment contract?

4. If Jane Doe increases the output of your firms engineers by 5%, what is her contribution to the firms operating profit?

5. What is the Present Value of Jane Does three year contribution to operating profits?

6. What is the Net Present Value of hiring Jane Doe?

The second candidate for the CEO position is a bit of a technology superstar, Alan Musk, and at his last company inspired and increased productive output of engineering employees by 12%, but is asking for total annual compensation of $21,000,000.

7. What is the Present Cost of the Alan Musks three year contract?

8. If Alan Musk increases the output of your firms engineers by 12%, what is his contribution to the firms operating profit?

9. What is the Present Value of Alan Musks three year contribution to operating profits?

10. What is the Net Present Value of hiring Alan Musk?

11. Which CEO should you hire? Defend your answer.

12. Describe in your own words both aspects of the role of the financial manager.

13. What is the name of the conflict that exists between shareholders and the CEO?

14. What steps can you take as the chairman of the board of directors to lessen this conflict?

15. What would be the ratio of the salary of the CEO to the salary of the average engineer if you hire Jane Doe? And for Alan Musk?

16. Social media influencers are starting to criticize the ratio between the salary of the CEO and your average engineer. What do you say to them?