On January 1, 2020, 50 executives were given a performance-based share option plan that would award them with a maximum of 300 shares of $10 par common stock for $20 a share. On the grant date, the fair value of an option was $16.50. The number of options that will vest depends on the size of the annual average increase in sales over the next three years according to the following table: Annual Average Increase in Sales No. of Shares Greater than 5% 50 Greater than 10% 150 Greater than 15% 300 On the grant date, the company estimates the annual average sales increase will be 14%.Refer to Exhibit 15-6. The estimated total compensation cost will be a. $123,750. b. $27,500. c. $55,000. d. $247,500.
On January 1, 2020, 50 executives were given a performance-based share option plan that would award them with a maximum of 300 shares of $10 par common stock for $20 a share. On the grant date, the fair value of an option was $16.50. The number of options that will vest depends on the size of the annual average increase in sales over the next three years according to the following table: Annual Average Increase in Sales No. of Shares Greater than 5% 50 Greater than 10% 150 Greater than 15% 300 On the grant date, the company estimates the annual average sales increase will be 14%.Refer to Exhibit 15-6. The estimated total compensation cost will be a. $123,750. b. $27,500. c. $55,000. d. $247,500.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2020, 50 executives were given a performance-based share option plan that would award them with a maximum of 300 shares of $10 par common stock for $20 a share. On the grant date, the fair value of an option was $16.50. The number of options that will vest depends on the size of the annual average increase in sales over the next three years according to the following table:
Annual Average Increase in Sales
No. of Shares
Greater than 5%
50
Greater than 10%
150
Greater than 15%
300
On the grant date, the company estimates the annual average sales increase will be 14%.
Refer to Exhibit 15-6. The estimated total compensation cost will be
a. $123,750.
b. $27,500.
c. $55,000.
d. $247,500.
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