9. Randolph uses an incentive-based compensation plan for its upper management personnel. Division managers receive approximately half of their annual compensation, on average, as bonuses or incentive stock. These percentages vary greatly, of course, from year to year, depending on the state of the economy and on how both the corporation and the divisions did during the recent past. The incentive compensation at the division level is based on three factors: (1) the division's ROE, (2) its sales growth, and (3) its earnings growth, all averaged over the last 3 years. The incentive compensation of the senior corporate executives is based on the same three factors, but measured for the entire corporation. a. Do you see any obvious conceptual problems with the company's compensation program? b. How would you expect the compensation plan to inuence managers1 reaction to Kravitz's recommendations? Would these reactions be good or had from the standpoint of maximizing the price of Randolph's stock? Be sure to discuss fully your answers to these questions. c. Should Randolph change either its compensation plan or its capital budgeting procedures to make them more consistent with one another and with the goal of stock price maxi- mization'? Be sure to discuss fully your answers to these questions