Witter House is a calendar-year firm with 380 million common shares outstanding throughout 2021 and 2022. As part of its executive compensation plan, at January 1, 2020, the company had issued 35 million executive stock options permitting executives to buy 35 million shares of stock for $10 within the next eight years, but not prior to January 1, 2023. The fair value of the options was estimated on the grant date to be $3 per option. In 2021, Witter House began granting employees stock awards rather than stock options as part of its equity compensation plans and granted 20 million restricted common shares to senior executives at January 1, 2021. The shares vest four years later. The fair value of the stock was $14 per share on the grant date. The average price of the common shares was $14 and $25 during 2021 and 2022, respectively.
Witter House is a calendar-year firm with 380 million common shares outstanding throughout 2021 and 2022. As part of its executive compensation plan, at January 1, 2020, the company had issued 35 million executive stock options permitting executives to buy 35 million shares of stock for $10 within the next eight years, but not prior to January 1, 2023. The fair value of the options was estimated on the grant date to be $3 per option. In 2021, Witter House began granting employees stock awards rather than stock options as part of its equity compensation plans and granted 20 million restricted common shares to senior executives at January 1, 2021. The shares vest four years later. The fair value of the stock was $14 per share on the grant date. The average price of the common shares was $14 and $25 during 2021 and 2022, respectively.
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 14P
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