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Suppose all plant and division managers were paid only a fixed salary -no other incentives or bonuses.  a) describe the agency problems that would appear in capital investment decisions.  b) how would tying the managers' compensation to EVA alleviate these problems ?

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Suppose all plant and division managers were paid only a fixed salary -no other incentives or bonuses. Â a) describe the agency problems that would appear in capital investment decisions. Â b) how would tying the managers' compensation to EVA alleviate these problems ?
The agency problems that would appear in capital investment decisions would be enormous. The investors that invested hard earned money would be at the mercy of ...

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Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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