Question

Suppose compensation is given by W = 512,000 + 217π + 10.08S, where W = total compensation of the CEO, π = company profits (in millions) = $200, and S = sales (in millions) = $400. What percentage of the CEO's total earnings are tied to profits of the firm?

Answer 1

Answer:

Percentaje CEO's earnign tied to the profits = 7,76%

Explanation:

As you can se in the equation there are two veariables that are independent, that are π ,and S, according with the information you have to replace the variables with the amount of money of sales and profit.

W = 512,000 + 217π + 10.08S

W= 512,000 + 217 ($200) + 10.08($400)

W = 512,000 +$43,400+ 4032

π is the variable tied to the profits, it means that $43,400 correspond to the amount of money that the CEO will receive for the profit

W= $559,432

Now you have to calculate the percentage that the profits representing in the total compensation,

Percentaje profits =( $43,400/559,432)

Percentaje Profits = 7,76%