Question

Under its executive stock option plan, N Corporation granted options on January 1, 2016, that permit executives to purchase 11.0 million of the company's $1 par common shares within the next eight years, but not before December 31, 2018 (the vesting date). The exercise price is the market price of the shares on the date of grant, $16 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. Ignoring taxes, what is the effect on earnings in the year after the options are granted to executives? (Round your answer to 1 decimal place.) $66.0 million.$44.0 million.$ 0 million.$14.7 million.Need answer qucikly

Answer 1

Effect of earnings in the year after options are granted $44.0 milliion/3 = 14.7 million

Step-by-step explanation:

Step 1. Given information.

• total number of options granted $11 million

• fair value of option as per option pricing model $ 4

Step 2. Formulas needed to solve the exercise and Calculation.

Effect of earnings in the year after options are granted =

$44.0 milliion/3 = 14.7 million

Effect of earnings in the year after options are granted $44.0 milliion/3 = 14.7 million