Suppose you own a firm and wish to compensate your employees with a performance-related compensation plan. You do not wish to pay them if the value of your company's shares is less than or equal to $15 a share. If the share price is above $15, you wish to pay your employees a fixed amount of $100,000, for any price over $15.

Explain how you can create such a compensation scheme by granting your employees a combination of options. Be precise as to the number of options transacted, their exercise prices and whether your employees purchase or sell these options. Assume that stock prices are traded in increments of $1.

Start by plotting the compensation scheme's payoff for each possible stock price, and then construct a portfolio of options that replicates these payoffs. You may purchase and sell options.