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Part $1$

You are the CEO $of$ a company and are considering a new project that, $if$ accepted, would add $$1\mathrm{.}5$ million $to$ the value $of$ the company's equity. $If$ you decide $to$ proceed with the project, you realize that you will have $to$ work eight extra hours each week for one year; the value $to$ you $of$ losing this leisure time $is$ $$53$ comma $000.$ Assume that your salary will not $be$ adjusted $to$ reflect this extra work and that the net benefit $to$ you $is$ your only consideration $in$ deciding whether $or$ not $to$ proceed with the project. Complete parts a through $e$ below.

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Part $1$

$a.$ What would your decision $beif$ you owned $100\%of$ the company's equity? Select the correct choice below, and fill $in$ the answer box $to$ complete your choice.

$(Roundto$ the nearest dollar. $Do$ not include the $ symbol $in$ your answer.$)$

$A.$

Proceed with the project because the net benefit $is$

$$

$1,447,000$ dollars.

Your answer $is$ correct.$B.$

$Do$ not proceed with the project because the net benefit $is$

$$

enter your response here dollars.

Part $2$

$b.$ What would your decision $beif$ you owned $1\%of$ the company's equity? Select the correct choice below, and fill $in$ the answer box $to$ complete your choice.

$(Roundto$ the nearest dollar. $Do$ not include the $ symbol $in$ your answer.$)$

$A.$

$Do$ not proceed with the project because the net benefit $is$

$$

negative $38,000$ dollars.

Your answer $is$ correct.$B.$

Proceed with the project because the net benefit $is$

$$

enter your response here dollars.

Part $3$

$c.$ What would your decision $beif$ you owned $3\%of$ the company's equity and the board $of$ directors promised you a bonus $of$ $$25$ comma $000if$ the company's equity $is$ increased $by$ $$50$ comma $000or$ more? Select the correct choice below, and fill $in$ the answer box $to$ complete your choice.

$(Roundto$ the nearest dollar. $Do$ not include the $ symbol $in$ your answer.$)$

$A.$

Proceed with the project because the net benefit $is$

$$

$17,000$ dollars.

Your answer $is$ correct.$B.$

$Do$ not proceed with the project because the net benefit $is$

$$

enter your response here dollars.

Part $4$

$d.$ Suppose you own $3\%of$ the company's equity and the board $of$ directors promised you a bonus $of$ $$25$ comma $000if$ the company's equity $is$ increased $by$ $$50$ comma $000or$ more. Assume that accepting the project $no$ longer adds $$1\mathrm{.}5$ million $to$ the company's equity value, but rather increases the equity value $by$ $$X.$ How high must $Xbe$ for you $to$ accept the project?

The project must increase the company's equity value $by$ more than

$$

$933,333$ dollars.

$(Roundto$ the nearest dollar. $Do$ not include the $ symbol $in$ your answer.$)$

Part $5$

$e.$ Evaluate your results $in$ parts $atodin$ the context $of$ the principal$-$agent problem. Evaluate your result $in$ part $a.$ Choose the correct answer below.

$A.$

Your incentives are aligned with the shareholders because accepting the project maximizes shareholder wealth and your net benefit $is$ positive.

$B.$

Your incentives are perfectly aligned with the owners $of$ the company since you actually own the whole company.

$C.$

Your incentives are not aligned with the shareholders because you accept the project $to$ increase your monetary wealth but the project does not maximize shareholder wealth.

$D.$

Your incentives are not aligned with the shareholders because the project should $be$ accepted $to$ maximize shareholder wealth but you reject $it$ because your net benefit $is$ negative.