Question: case 21 the tex tech company when you hired dan...
Case 2.1 The Tex tech Company
When you hired Dan to manage your business, the TexTech Company, you agreed to pay him a bonus of 10% of profit at the end of each year. There are now two projects available for investment by TexTech, but it can only take on one of them: Project A will generate profits of $50,000 per year, and the detailed financial calculations show that it will increase the value of the company by $123,000. Project B will generate profits of $40,000 per year but will increase the company’s value by $125,000.
- Which project is Dan likely to choose, and why?
- Which project would you, the owner of the company, prefer?
- By what means can the owners of the company encourage Dan to focus on owners’ wealth maximization?