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OLEGan [10]
3 years ago
15

On January 1, 2018, M Company granted 90,000 stock options to certain executives. The options are exercisable no sooner than Dec

ember 31, 2020, and expire on January 1, 2024. Each option can be exercised to acquire one share of $1 par common stock for $12. An option-pricing model estimates the fair value of the options to be $5 on the date of grant. If unexpected turnover in 2019 caused the company to estimate that 10% of the options would be forfeited, what amount should M recognize as compensation expense for 2019?
Business
1 answer:
hram777 [196]3 years ago
6 0

Answer:

$120,000

Explanation:

Given that,

stock options = 90,000

Each option can be exercised to acquire one share of $1 par common stock for $12.

Total Value of the option = stock options × fair value of the options

                                          = $90,000 × $5

                                          = $450,000

company to estimate that 10% of the options would be forfeited, so,

= 90% of Total Value of the option

= 0.9 × $450,000

= $405,000

2 out of 3 years = $405,000 × 2/3

                           = $270,000

=\frac{Total\ value\ of\ the\ options}{no.\ of\ years}

=\frac{450,000}{3}

= $150,000

Compensation expense (2019) = $270,000 - $150,000

                                                    = $120,000

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ROI                                              7                        1.5                     10.5

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The condensed income statements will show all the divisions and their operating incomes in one statement as shown above.

The profit margin can be found as:

= Operating income / Sales x 100

The Return on Investment (ROI) is:

= Operating income / Invested assets  x 100

Investment turnover can be found as:

= Sales / Invested assets x 100

Find out more on Return on Investment at brainly.com/question/26445145.

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