Hazel Received 20 NQOs (Each Option Gives Her the Right

question 32

Essay

Hazel received 20 NQOs (each option gives her the right to purchase 10 shares of stock for $7 per share)at the time she started working, when the stock price was $14 per share. Now that the share price is $20 per share, she intends to exercise all of her options. How much income will Hazel recognize on the exercise date and how much tax will she pay, assuming her marginal tax rate is 24 percent?

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Definitions:

Revenue

The income that a business receives from its normal business activities, typically from the sale of goods and services to customers.

Net Fixed Assets

The value of a company's property, plant, and equipment minus depreciation, representing the company's investment in long-term assets.

Variance

A measure of the dispersion of a set of data points around their mean value, indicating how spread out the data points are.

Standard Deviation

A measure of the dispersion or spread of a set of values, calculated as the square root of the variance, indicating how much the values deviate from the mean.