How to get formula to pay bonus to employees

[ptgallant]

Jim (the owner of AcmeCo) recently sold his business to TitanTek. In addition to the cash paid when the sale occurred, TitanTek is willing to pay Jim up to $40,000,000 in additional "Earnout" payments depending upon AcmeCo's attainment of various performance targets in the 12 months following the sale. Jim wants to share a portion of the earnout payments received from Titantek with his employees, as follows:
a.) if the earnout received is less than $10 million, Jim will not share anything with his employees;
b.) if the earnout payment received is exactly $10 million, Jim will share $100,000 with employees;
c.) if the earnout payment received is exactly $40 million, Jim will share $8,000,000 with employees; and d.) if the earnout payment received is between $10 million and $40 million, Jim wants to share between 100,000 and $8,000,000, the exact amount to be calculated on an exponential compounding curve.


What is the formula to solve ‘d.)’? What formula will draw the exponential compounding curve and calculate the exact amount of bonus that Jim will share with employees?

 

[JeffM]

Without worrying about specific numbers, what would the form of the formula be?

 

[stapel]

Jim (the owner of AcmeCo) recently sold his business to TitanTek. In addition to the cash paid when the sale occurred, TitanTek is willing to pay Jim up to $40,000,000 in additional "Earnout" payments depending upon AcmeCo's attainment of various performance targets in the 12 months following the sale. Jim wants to share a portion of the earnout payments received from Titantek with his employees, as follows:
a.) if the earnout received is less than $10 million, Jim will not share anything with his employees;
b.) if the earnout payment received is exactly $10 million, Jim will share $100,000 with employees;
c.) if the earnout payment received is exactly $40 million, Jim will share $8,000,000 with employees; and
d.) if the earnout payment received is between $10 million and $40 million, Jim wants to share between 100,000 and $8,000,000, the exact amount to be calculated on an exponential compounding curve.

What is the formula to solve ‘d.)’? What formula will draw the exponential compounding curve and calculate the exact amount of bonus that Jim will share with employees?

To expand on the previous reply, what is your understanding of the general form of an "exponential compounding curve"? What is the equation, and for what does each variable stand? (For instance, is it anything like what is displayed and explained here?)

When you reply, please include a clear listing of your efforts so far, starting with how you plugged the given information into the given formula. Thank you!

 

[ptgallant]

I am not sure how to write the formula or solve. What I want to do is help Jim and his employees understand when the sale is actually closed how to calculate the bonus pool at different levels of earn-out received. For example, what formula/process would I use to compute the bonus pool amount if the earnout received were $20 mil or $28,755,543 or ....

 

[stapel]

I am not sure how to write the formula or solve.

Well, start with the formula they gave you in class, when they covered this topic. As for solving, they should have covered that material no later than when they gave you the formula to use. But if you're not clear on how that words, try studying the lesson provided at the link in the previous reply.

 

[HallsofIvy]

An "exponential curve" has an equation of the form y= Ae^(bx) for some numbers A and b.