Setting Greater Pay Differentials at the Top of the Pay

question 47

Multiple Choice

Setting greater pay differentials at the top of the pay structure is based on:

• A)marginal productivity theory
• B)institutional theory
• C)equity theory
• D)tournament theory
• E)marginal utility theory

---

Definitions:

Discount Rate

Discount rate is the interest rate used in discounted cash flow analysis to determine the present value of future cash flows.

Net Present Value

A financial metric that calculates the present value of all cash inflows and outflows from a project or investment, taking into account the time value of money.

Internal Rate of Return

The discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Average Payoff

A measure used in decision theory and game theory to determine the expected value of an investment or decision under uncertainty.