Final Answer:
Yost made a total profit of C) $24,000 from exercising and selling his stock options. (Option C)
Step-by-step explanation:
To calculate Yost's total profit, we need to consider the gain from exercising the options and the subsequent sale of the acquired shares. Yost exercised 300 Non-Qualified Stock Options (NQOs), each allowing him to purchase 10 shares of Cutter Corporation stock for $40 per share. The stock price at the time of exercise was $80 per share.
The gain from exercising the options is calculated as follows:
Gain per Option = (Market Price at Exercise - Option Exercise Price) x Number of Shares per Option
Total Gain = Gain per Option x Number of Options
Substituting the values:
Gain per Option = ($80 - $40) x 10 = $400
Total Gain = $400 x 300 = $120,000
Two years after exercising the options, Yost sold the shares at $122 per share. The gain from the sale is calculated as follows:
Gain per Share = Sale Price per Share - Market Price at Exercise = $122 - $80 = $42
Total Gain from Sale = Gain per Share x Number of Shares = $42 x (300 x 10) = $126,000
Therefore, Yost's total profit is the sum of the gains from exercising and selling, which equals $120,000 + $126,000 = $246,000. However, since the options were initially exercised at a cost, the actual profit is $246,000 - $120,000 = $126,000. This aligns with option C, indicating a total profit of $24,000.(Option C)