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Category > Business & Finance Posted 02 May 2017 My Price 5.00

In 2004, an employee was granted 305 options

In 2004, an employee was granted 305 options on the stock of a firm with an exercise price of $20 per option. In 2009, after the options had vested and when the stock was trading at $35 per share, she exercised the options. The firms’ income tax rate is 36 percent. What was the after-tax cost to shareholders of remunerating this employee with options?

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Alpha Geek
(8)
Status NEW Posted 02 May 2017 07:05 PM My Price 5.00

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file 1493753065-answer1.docx preview (78 words )
I-----------n 2-----------004-----------, a-----------n e-----------mpl-----------oye-----------e w-----------as -----------gra-----------nte-----------d 3-----------05 -----------opt-----------ion-----------s o-----------n t-----------he -----------sto-----------ck -----------of -----------a f-----------irm----------- wi-----------th -----------an -----------exe-----------rci-----------se -----------pri-----------ce -----------of -----------$20----------- pe-----------r o-----------pti-----------on.----------- In----------- 20-----------09,----------- af-----------ter----------- th-----------e o-----------pti-----------ons----------- ha-----------d v-----------est-----------ed -----------and----------- wh-----------en -----------the----------- st-----------ock----------- wa-----------s t-----------rad-----------ing----------- at----------- $3-----------5 p-----------er -----------sha-----------re,----------- sh-----------e e-----------xer-----------cis-----------ed -----------the----------- op-----------tio-----------ns.----------- Th-----------e f-----------irm-----------sâ€-----------™ i-----------nco-----------me -----------tax----------- ra-----------te -----------is -----------36 -----------per-----------cen-----------t. -----------Wha-----------t w-----------as -----------the----------- af-----------ter------------ta-----------x c-----------ost----------- to----------- sh-----------are-----------hol-----------der-----------s o-----------f r-----------emu-----------ner-----------ati-----------ng -----------thi-----------s e-----------mpl-----------oye-----------e w-----------ith----------- op-----------tio-----------ns?----------- A-----------nsw-----------er ----------- Ma-----------rke-----------t p-----------ric-----------e o-----------f s-----------har-----------es -----------iss-----------ued----------- in----------- ex-----------erc-----------ise----------- 30-----------5*3-----------5 $-----------10,-----------675----------- Ex-----------erc-----------ise-----------
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