Second Link Services granted restricted stock units (RSUs) representing 6 millio

Question

Second Link Services granted restricted stock units (RSUs) representing 6 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within four years. After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the shares. The common shares had a market price of $29 per share on the grant date.

Ignoring taxes, what is the total compensation cost pertaining to the restricted stock units? (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)

Ignoring taxes, what is the effect on earnings in the year after the RSUs are granted to executives? (Enter your answer in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

Second Link Services granted restricted stock units (RSUs) representing 6 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within four years. After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the shares. The common shares had a market price of $29 per share on the grant date.

Explanation / Answer

Answer 1. Compensation Expenses = 6 Million Shares X $29 per share (Fair Value per Share) Compensation Expenses = $174 Millions Answer 2. Compensation Expenses deducted from Income = $174 Millions / 4 Years Compensation Expenses deducted from Income = $43.50 Millions

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