Hazel Received 20 NQOs (Each Option Gives Her the Right

question 93

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 cash will Hazel need on the exercise date to exercise the stock option?

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Definitions:

After-Tax Discount Rate

The rate of return on an investment after adjusting for taxes, used in net present value and other discounted cash flow analyses.

Incremental Sales

The additional sales generated by a particular business activity or decision, beyond what would have been achieved without it.

One-Time Expense

An uncommon or unique expenditure that is not expected to recur in the foreseeable future, often highlighted separately in financial statements.

Straight-Line Depreciation

A process for dividing the expense of a tangible asset uniformly across its expected lifetime in annual segments.