Eco 550 Check Your Understanding Week 1(Answers)

risks and determine the likelihood and consequence of that risk occurring during the project. The

Compensation systems can take on many forms, all of which have positives and negatives related to it. However, certain components are noted to be determinants of solid compensation plans. One agreement of a solid compensation system is the use of incentives. “Clearly a successful companies set objectives that will provide incentives to increase profitability” (Needles & Powers, 2011). Incentive bonuses should be measures that the company finds important to long-term growth. According to Needles & Powers (2011) the most successful companies long term focused on profitability measures. For large for-profit firms, compensation programs should offer stock options. The interweaving between the market value of a company’s stock and company’s performance both motivate and increase compensation to employees As the market value of the stock goes up, the difference between the option price and the market price grows, which increases the amount of compensation” (Needles & Powers, 2011). Conclusively, a compensation plan should serve all stakeholders, be simple, group employees properly, reflect company culture and values, and be flexible (Davis & Hardy, 1999; The Basics of a Compensation Program).

Part I. Each question is worth 3 points. For multiple choice questions, use highlight or bold to mark your answers.

During week one meet with staff and providers to discuss the research that supports my change project. Also, randomly talking with patients to get their input and what they feel would meet their learning needs. Meeting with the stakeholders from my clinic. Reaching out to the IT department and meeting with the finance department.

The second approach is having a management team whose interests are aligned with shareholders. Executives are subject to stock ownership guidelines that require them to hold specified multiples of salary in target stock. Incentive compensation opportunities are based on goal levels of performance that are approved by independent directors, aligned with Target’s objectives and disclosed to shareholders.

1 Permeable systems are characterized by being penetrable by customers via what two forms of contact?

The EE 1896/4620 Info Page is missing the directive for dispositioning free items. If you pray for salvation there is a directive to select the Salvation Package from inventory, but there is no directive to mark the disposition as Info. I know that this is the normal directive for free items and if Info trumps Prayer we might want to put the directive on the Info Page. Most agents might think since they only prayed with the caller that Prayer would be the disposition. Can you look into this directive?

To begin with, it is clear that the management team including CEO and senior level managers would benefit from a healthy bottom line during their tenure, as their compensation packages typically are structured to be linked to company performance as a way to align management and shareholders’ interests (Bergstresser & Phillipon, 2009). Company’s profitability matters to shares price. The more profitable a company is, the more attractive it will be for the potential investors.

Question 1. 1. (TCO A) If investors agree on the amount, timing, and certainty of after-tax cash flows associated with an investment proposition, and if they have the same opportunity cost of capital, would they generally place the same investment value on the property? Explain your answer. (Points : 20)

Or, let’s say that the riskiness of this project was over calculated. A beta of 2 instead of 2.54 would

In his words “Capitalism is also about the factories, the customers, the employees, the government, and the innovation and the hard work of the people who make the products and build the companies.” It seemed that Auhll was a believer in long-term shareholder value creation approach of stakeholder theory, but Auhll’s controversial actions spoke louder than his words. It turned out that, Auhll’s apparent long-term shareholder-value creation focus was contradicting with some of his own behavior. Auhll’s total compensation package was made up of base salary and performance bonus; where percentage of his base salary pay was increasing year by year and the bonus percentage was shrinking; especially during the years Circon struggled through the poor performance and the US Surgical’s(USS) hostile takeover attempt as depicted in the ‘compensation Summary appendix1’. Also, according to the case exhibit(4) footnote on page 21 of the case “Auhll’s was the member of his own compensation committee,” which was creating ‘conflict of interest’ and was against the core corporate governance guideline. Based on this, we can conclude that Auhll’s financial incentives were detached from stockholders best interests and CEO didn’t seem to have a strong long-term incentive. As shown in the exhibit 1-c of the case(p. 17), the HCMP product index was

According to CAPM, which measurement of a project’s risk is relevant? What complications does reality introduce into the CAPM view of risk, and what does that mean for our view of the relevant measure of a project’s risk?

In examining the driving force in a corporation’s success, one of the key factors is to maximize on shareholder wealth while considering the motivations of the management team. Often times, these interests are maintained through executive compensation packages that engage managers and executives to perform with regard to the best interests of shareholders. These executives are being incentivized through bonuses in the form of huge bonuses, stock options and awards. Many believe these rewards have become obscene and are in no way reflective of executive level performance.

Executive compensation keeps a highly controversial for recent years, with more credit crisis appears in companies, the action of shareholders’ vote on directors payment get more acception. The new reform act 2013 in the UK gives firm’ owners more power and influence to shape managers’ pay. In fact, this act is not only popular in the uk, also sprung up in other European countries, Australia and USA. In this essay, I will focus on discussing the relation between UK shareholder voting and executive pay. As for shareholders have a binding vote on executive compensation, I think the negative effects overweigh the positive ones. In the following paragraphs, I am gong to describe the benefits and harms.

In theory, the basic principle of risk allocation for the project finance is “Allocating project risks to the most suitable participant whose risk preference is higher” (Xiao, 2003).