A new high-growth business has issued stock options to new employees as part of their overall compensation. The options have a strike price of $.25 and vest evenly over 4 years but also automatically vest on a change in control (sale of the company). Jean works for this company and received 10,000 options when she was hired. After her third year of the company is acquired by a much larger firm at a price equal to $12.00 per share. Based on this scenario how much would Jean gain from the execution and sale of her shares upon the sale? In a different scenario, the company is not sold but Jean leaves the company after 24 months. How many shares does she have a right to own and how much would it cost her to exercise her options into shares?
A new high-growth business has issued stock options to new employees as part of their overall compensation. The options have a strike price of $.25 and vest evenly over 4 years but also automatically vest on a change in control (sale of the company). Jean works for this company and received 10,000 options when she was hired. After her third year of the company is acquired by a much larger firm at a price equal to $12.00 per share. Based on this scenario how much would Jean gain from the execution and sale of her shares upon the sale? In a different scenario, the company is not sold but Jean leaves the company after 24 months. How many shares does she have a right to own and how much would it cost her to exercise her options into shares?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A new high-growth business has issued stock options to new employees as part of their overall compensation. The options have a strike price of $.25 and vest evenly over 4 years but also automatically vest on a change in control (sale of the company). Jean works for this company and received 10,000 options when she was hired.
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- After her third year of the company is acquired by a much larger firm at a price equal to $12.00 per share. Based on this scenario how much would Jean gain from the execution and sale of her shares upon the sale?
- In a different scenario, the company is not sold but Jean leaves the company after 24 months. How many shares does she have a right to own and how much would it cost her to exercise her options into shares?
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