Answer:
Gogo Inc. and Mrs. Mill
The Income that Mrs. Mill must recognize in the year of exercise is:
= $23,100
Explanation:
a) Data and Calculations:
Options given to Mrs. Mill = 10,000 shares of Gogo stock
Exercise price of the options = $8 per share
Period of option exercise = 5 years
Selling price of shares at grant date = $7.87
Selling price of shares at exercise date = $10.31
Compensation expense recorded by Gogo = $26,700
Cost of options to Mrs. Mill = $80,000 (10,000 * $8)
Income that Mrs. Mill must recognize in the year of exercise = $23,100 ($10.31 - $8) * 10,000
Answer:
A) $0
Explanation:
as per IRC section 101g, if the payment exceeds the greater of per actual cost then the excess payment amount will be taxable.
total tax free payment = 360*30
= $10,800
Therefore, The taxable amount is $0
Answer:
The value of the stock today is $20
Explanation:
Using the CAPM equation, we first calculate the required rate of retunr on the stock.
The equation for CAPM is,
r = rRF + Beta * rpM
Where,
- rRF is the risk free rate
- rpM is the risk premium on market
- Beta * rpM is the risk premium on stock
r = 0.05 + 0.04
r = 0.09 or 9%
The value of the stock can be calculated using the zero growth model of DDM. The DDM values the stock based on the present value of the expected future dividends from the stock. As the dividend from the stock is expected to remain constant through out to an indefinite period, the value of the stock today is,
P0 = Dividend / r
P0 = 1.8 / 0.09
P0 = $20
Answer:
&10
Explanation:
This is a case of simple interest.
It gotten as Interest= Prt
Where:
P=principal
r=rate
t=time
Therefore
$500×2%×1= 10
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