The Executive Thinks the Growth Rate Could Shrink to 7

question 99

Essay

The executive thinks the growth rate could shrink to 7% per year if the company has growing pains, but on the other hand it could be as high as 15% per year if the company prospers. What is the expected value of the stock options in those cases?

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Definitions:

Consolidated Financial Statements

Financial statements that present the assets, liabilities, equity, income, expenses, and cash flows of a parent company and its subsidiaries as one single economic entity.

Subsidiaries

Companies that are controlled by another company, often referred to as the parent company, through ownership of over 50% of the subsidiary's voting stock.

Goodwill Impairment

A decrease in the value of goodwill on a company's balance sheet, indicating that the expected future cash flows from an acquisition are lower than initially estimated.

Straight-Line Method

A method of calculating the depreciation of an asset, which spreads the cost evenly over its useful life.