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On 1 July 2021, Denver Ltd Granted 800 Share Options

question 24

Multiple Choice

On 1 July 2021, Denver Ltd granted 800 share options with an exercise price of $25 to the CFO, conditional on the CFO remaining in employment with the company until 30 June 2024. The exercise price will drop to $20 if Denver's earnings increase by an average of 10% per year over the three year period. On 1 July 2021 the estimated fair value of the share options with an exercise price of $25 is $15 per option, and if the exercise price is $20, the estimated fair value of the options is $18 per option. During the year ended 30 June 2022 Denver's earnings increased by 10% and they are expected to continue to increase at this rate over the next two years.
During the year ended 30 June 2023 Denver's earnings increased by 8% and Denver management expected that the earnings target would be achieved.
During the year ended 30 June 2024 Denver's earnings increased by 12%.
When calculating the remuneration expense to be recognised for the year ended 30 June 2023 which of the following dollar values should be included in the calculation?

Definitions:

Industry Short-run

A period in which at least one of a firm's inputs is fixed, limiting the firm's ability to adjust fully to market changes.

Marginal Cost

The financial addition incurred by manufacturing one more unit of a product or service.

Fixed Cost

represents expenses that do not change in total regardless of the level of output or activity, such as rent or salaries.

Lawn-mowing

The act of cutting the grass on lawns to maintain a neat appearance and promote healthy grass growth.