Please show calculations Under its executive stock option plan, W Corporation gr

Question

Please show calculations

Under its executive stock option plan, W Corporation granted options on January 1, 2011, 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, 2013 (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 are exercised on April 2, 2014, when the market price is $21
per share. By what amount will W's shareholder's equity be increased when the options are exercised?
A. $60 million
B. $270 million
C. $315 million
D. $330 million

Explanation / Answer

Option C is the corrrect answer. On January 1, 2011   15million of the company's $1 par common shares          $15,000,000 The exercise price is the market price of the shares on the date of grant $18 (15,000,000*$18)   $270,000,000 Thke fair value of the options (15,000,000*4)   $60,000,000 The options are exercised on April 2, 2014 (15,000,000*$21)                    $315,000,000=$315million                                                                                    

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