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You are the chairman of the board of directors for an innovative technology company, and you...

You are the chairman of the board of directors for an innovative technology company, and you are looking to hire a new CEO. Your shareholders require an 8% return.
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.
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.
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.
What is the Present Cost of the Alan Musk’s three year contract?
If Alan Musk increases the output of your firm’s engineers by 12%, what is his contribution to the firm’s operating profit?
What is the Present Value of Alan Musk’s three year contribution to operating profits?
What is the Net Present Value of hiring Alan Musk?

Which CEO should you hire? Defend your answer.

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Expert Solution

jeff jeffy answered 2 weeks ago
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