Question

Under its executive stock option plan, Z Corporation granted options on January 1, 2021, 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, 2023 (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 are anticipated. The options expired in 2027 without being exercised. By what amount will Z's shareholder's equity be increased as a result of having granted the options

Answer 1

$60 million

Step-by-step explanation:

Calculation to determine By what amount will Z's shareholder's equity be increased as a result of having granted the option

Using this formula

Increased in shareholder's equity=Fair value per option*Options granted

Let plug in the formula

Increased in shareholder's equity=$4* 15 million shares

Increased in shareholder's equity=$60 million

Therefore The amount that Z's shareholder's equity increased as a result of having granted the option is $60 million