) Your firm needs to downsize one of its divisions and is tasking you with offering buyouts to two of the five non-managerial employees in the division. The manager of that division has given you the information in the table below based on her assessment of the annual present value of each employee’s current wages, productivity, alternatives (which implicitly incorporates time before retirement). Based on the information in the table and optimal buyout theory, which two employees will you offer buyouts to and how much will you offer each of them? Show your work.Who is likely the employee that is mid-career? Why?Why isn’t the present value of anyone’s alternative greater than the present value of his or her wages?If the manager of that division made an announcement to all five of these employees that layoffs were necessary if no one took the buyouts offered to them, how would that alter your decision about who to offer the buyouts to and how much to offer?NamePV(wages)PV(productivity)PV(alternative)Kaylee$120,000$100,000$102,000Jayne$80,000$45,000$70,000River$390,000$360,000$320,000Malcolm$300,000$340,000$280,000Zoë$185,000$165,000$166,000

OPTIMAL BUYOUT THEORY. Name PV WAGES/PV(Productivity) PV(Alternative) Kaylee $100000 $102000…

Answered: Your firm needs to downsize one of its…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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) Your firm needs to downsize one of its divisions and is tasking you with offering buyouts to two of the five non-managerial employees in the division. The manager of that division has given you the information in the table below based on her assessment of the annual present value of each employee’s current wages, productivity, alternatives (which implicitly incorporates time before retirement).

Based on the information in the table and optimal buyout theory, which two employees will you offer buyouts to and how much will you offer each of them? Show your work.
Who is likely the employee that is mid-career? Why?
Why isn’t the present value of anyone’s alternative greater than the present value of his or her wages?
If the manager of that division made an announcement to all five of these employees that layoffs were necessary if no one took the buyouts offered to them, how would that alter your decision about who to offer the buyouts to and how much to offer?

Name	PV(wages)	PV(productivity)	PV(alternative)
Kaylee	$120,000	$100,000	$102,000
Jayne	$80,000	$45,000	$70,000
River	$390,000	$360,000	$320,000
Malcolm	$300,000	$340,000	$280,000
Zoë	$185,000	$165,000	$166,000

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