Under its executive stock option plan, W Corporation granted options on January

Question

Under its executive stock option plan, W Corporation granted options on January 1, 2018, that permit executives to purchase 18 million of the company's $1 par common shares within the next eight years, but not before December 31, 2020 (the vesting date). The exercise price is the market price of the shares on the date of grant, $20 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. One-sixth of the options are exercised on April 2, 2021, when the market price is $21 per share. By what amount will w's shareholder's equity increase when the options are exercised on April 2, 2021? Select one: A. $60 million. OB. $270 million. C. $330 million. O D. $315 million.

Explanation / Answer

CALCULATION OF THE VALUE OF THE SHAREHOLDER'S EQUITY INCREASE Number of shares exercised = (18 million / 6) = 3 Million Multiply By "X " by Exercise Price of the shares on the data of grant $ 20 Per Shares Total 60 Million So shareholder's Equity icnrease with the option exercised in 60 Million Answer = Option A = $ 60 Million

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