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1 March, 10:11

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?

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  1. 1 March, 11:23
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    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%
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