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On January 1, 2021, EG Corporation granted 22 million options under its executive stock option plan that permit executives to purchase 22 million of the company's $1 par common shares within the next seven years, but not before December 31, 2024 (the vesting date). The exercise price is the market price of the shares on the date of grant, $26 per share. The fair value of the options estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. 1. Ignoring taxes, what is the total compensation cost EG Corporation will recognize as a result of the stock options? 2. Ignoring taxes, what is the effect on EG's earnings in the year after the options are granted to executives? (For all requirements, enter your answer In millions (l.e., 10,000,000 should be entered as 10).) 1. Total compensation cost 2. Effect on earnings decreased by $ 17.6 88 million million 4

On January 1, 2021, EG Corporation granted 22 million options under its executive stock option plan that permit executives to purchase 22 million of the company's $1 par common shares within the next seven years, but not before December 31, 2024 (the vesting date). The exercise price is the market price of the shares on the date of grant, $26 per share. The fair value of the options estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. 1. Ignoring taxes, what is the total compensation cost EG Corporation will recognize as a result of the stock options? 2. Ignoring taxes, what is the effect on EG's earnings in the year after the options are granted to executives? (For all requirements, enter your answer In millions (l.e., 10,000,000 should be entered as 10).) 1. Total compensation cost 2. Effect on earnings decreased by $ 17.6 88 million million 4

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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On January 1, 2021, EG Corporation granted 22 million options under its executive stock option plan that permit executives to purchase 22 million of the company's $1 par common shares within the next seven years, but not before December 31, 2024 (the vesting date). The exercise price is the market price of the shares on the date of grant, $26 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. 1. Ignoring taxes, what is the total compensation cost EG Corporation will recognize as a result of the stock options? 2. Ignoring taxes, what is the effect on EG's earnings in the year after the options are granted to executives? (For all requirements, enter your answer In millions (l.e., 10,000,000 should be entered as 10).) 1. Total compensation cost 2. Effect on earnings decreased by S 17.6 million million
Transcribed Image Text:On January 1, 2021, EG Corporation granted 22 million options under its executive stock option plan that permit executives to purchase 22 million of the company's $1 par common shares within the next seven years, but not before December 31, 2024 (the vesting date). The exercise price is the market price of the shares on the date of grant, $26 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. 1. Ignoring taxes, what is the total compensation cost EG Corporation will recognize as a result of the stock options? 2. Ignoring taxes, what is the effect on EG's earnings in the year after the options are granted to executives? (For all requirements, enter your answer In millions (l.e., 10,000,000 should be entered as 10).) 1. Total compensation cost 2. Effect on earnings decreased by S 17.6 million million
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