The expected profit of your firm is 1,000, plus 500 if the manager works hard. The manager receives a flat salary of 100 plus a portion x of any profit in excess of 1,300. The manager's utility function is
EU = [(compensation)0.5] if she does not work hard
EU = [(compensation)0.5 − 1] if she works hard
What portion x must be paid to the manager to ensure that she chooses to work hard? This new compensation package must be competitive with the 100 fl at salary.