A CEO is paid with stock options: he has the right to buy 200 of his company's shares at $100, and sell the shares within one year at whatever the market price then is. He is considering building a factory that will cost the firm $5 million, and increase profits by $8 million at the end of five years. 

Investors know all this. Will the CEO have his firm build the factory? Explain.

Answer rating: 100% (QA)

To determine whether the CEO will have his firm build the factory we need to consider the cost of bu... View the full answer