Under its executive stock option plan, M Corporation granted options on January 1, 2018, that permit...

Under its executive stock option plan, M Corporation granted options on January 1, 2018, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2020 (the vesting date). The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures were anticipated; however, unexpected turnover during 2019 caused the forfeiture of 5% of the stock options. Ignoring taxes, what is the effect on earnings in 2019?

Multiple Choice

$18.5 million.

$19 million.

$20 million.

$18 million

Expert Solution

ekkarill92 answered 2 years ago

Under its executive stock option plan, Q Corporation granted options on January 1, 2018, that permit...

Under its executive stock option plan, Q Corporation granted options on January 1, 2018, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2020 (the vesting date). The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures were...

Under its executive stock option plan, Worcester Corporation granted options on January 1,2018, that permit executives...

Under its executive stock option plan, Worcester Corporation granted options on January 1,2018, that permit executives to purchase 20 million of the company's $1 par common shares within the next eight years, but before December 31,2020 ( the vesting date). the exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $5 per option. No forfeitures are anticipated. The...

part a Under its executive stock option plan, N Corporation granted options on January 1, 2018,...

part a Under its executive stock option plan, N Corporation granted options on January 1, 2018, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2020 (the vesting date). The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No...

Under its executive stock option plan, National Corporation granted 20 million options on January 1, 2021,...

Under its executive stock option plan, National Corporation granted 20 million options on January 1, 2021, that permit executives to purchase 20 million of the company’s $1 par common shares within the next seven years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $24 per share. The fair value of the options, estimated by an appropriate option pricing model, is $3 per option. Suppose...

Under its executive stock option plan, National Corporation granted 30 million options on January 1, 2021,...

Under its executive stock option plan, National Corporation granted 30 million options on January 1, 2021, that permit executives to purchase 30 million of the company’s $1 par common shares within the next six years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $27 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. Suppose...

On January 1, 2018, M Company granted 95,000 stock options to certain executives. The options are...

On January 1, 2018, M Company granted 95,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2020, and expire on January 1, 2024. Each option can be exercised to acquire one share of $1 par common stock for $10. An option-pricing model estimates the fair value of the options to be $4 on the date of grant. If unexpected turnover in 2019 caused the company to estimate that 15% of the options would be...

5. On December 1, 2018, Folks Wagon Company adopted a stock-option plan that granted options to...

5. On December 1, 2018, Folks Wagon Company adopted a stock-option plan that granted options to key executives to purchase 50,000 shares of the company’s $10 par value common stock. The options were granted on January 1, 2019, and were exercisable 3 years after the date of grant if the grantee was still an employee of the company. The options expired 5 years from the date of grant. The option price was set at $35, and the fair value option-pricing...

On December 1, 2018, Folks Wagon Company adopted a stock-option plan that granted options to key...

On December 1, 2018, Folks Wagon Company adopted a stock-option plan that granted options to key executives to purchase 50,000 shares of the company’s $10 par value common stock. The options were granted on January 1, 2019, and were exercisable 3 years after the date of grant if the grantee was still an employee of the company. The options expired 5 years from the date of grant. The option price was set at $35, and the fair value option-pricing model...

On January 1, 2020, Sandhill Corp. granted stock options to its chief executive officer. This is...

On January 1, 2020, Sandhill Corp. granted stock options to its chief executive officer. This is the only stock option plan that Sandhill offers and the details are as follows: Option to purchase: 2,400 common shares Option price per share: $37.00 Fair value per common share on date of grant: $29.30 Stock option expiration: The earlier of eight years after issuance or the employee’s cessation of employment with Sandhill for any reason other than retirement Date when options are first...

On January 2, 2015, Ryan Company adopted a stock-option plan that granted options to key executives...

On January 2, 2015, Ryan Company adopted a stock-option plan that granted options to key executives to purchase 20,000 shares of the company's $5 par value common stock. The options were granted on January 2, 2015, and were exerciseable two years after the date of grant if the grantee was still an employee of the company. The option exercise price was set at $30, and the fair value option-pricing model determines the total compensation expense to be $400,000. What is...

Question