Whitney Corporation granted stock options that permit certain executives to buy 10,000 common shares at an exercise price of $10 per share. The fair value of an option was $5 at the grant date. Forty percent of the options were vested. What is the total amount of the "proceeds" from exercise of the hypothetical stock options that Whitney would assume in calculating diluted EPS?

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Business

Sydnee Brewer

11 March, 14:13

Whitney Corporation granted stock options that permit certain executives to buy 10,000 common shares at an exercise price of $10 per share. The fair value of an option was $5 at the grant date. Forty percent of the options were vested. What is the total amount of the "proceeds" from exercise of the hypothetical stock options that Whitney would assume in calculating diluted EPS?

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Moshe Petty · Answer 1

The total amount of the "proceeds" from exercise of the hypothetical stock options that Whitney would assume in calculating diluted EPS is $130,000

Explanation:

The computation of the total amount would be equal to

= Number of Common shares * exercise price + Number of Common shares * fair value * not vested option percentage

= 10,000 shares * $10 + 10,000 shares * $5 * 60%

= $100,000 + $30,000

= $130,000

Since the vested percentage is 40% So the not vested would be 60% as the total percentage is 100%