Reward performance:

Weighted average cost of capital (WACC):

Money in a company costs money.
1. When you borrow $, you need to pay interest to the bank. (cost)
2. Its a real cost bcos the SH expects to get a return
a. Risk free rate: how much money you could get if you put your $ on the
safest account
3. Any SH would expect to get at least 2%
4. Risk premium: stock beta is related to the volatility of the stock stock
prices moves. Little volatility beta close to 1.
5. Stock px that moves a lot has different variance. The higher your beta when
it moves up and down the higher the risk the investor needs to take. When
your stock moves like this, the investor expects higher return. Thats why
blue chips tend to have lower beta.
6. That volatility risk premium beta. Every co has its cost of k. SH expect to
receive when investing in your co.
7. Any profit that u make above the cost of money, is above and beyond the
SH.
Motivation

Merit increase table

People with better performance would have a higher increase (and vice versa)
Offering you more money will make u work harder or if you work harder well pay u
more
Exact same performance the one who is underpaid should be paid a higher
increase
1) Higher perf higher increase
2) Lower pay higher increase
Trying to normalize