Walter Maxim, the CEO of Digital Storage Devices Has Been

question 19

Essay

Walter Maxim, the CEO of Digital Storage Devices has been granted options on 300,000 shares. The stock is currently trading at $27 a share and the options are at the money. The volatility of the stock has been about.15 on an annual basis over the last several years. The option mature in 5 years, become exercisable in 3 years, and the risk free rate is 4%.
If Mr. Maxim earned $500,000 in regular annual salary why might why might he prefer to have $1,500,000 in straight salary versus salary and options?

Acknowledge the role of psychological and strategic factors in empowerment and leadership effectiveness.

Grasp the significance of involving others in decision-making for quality, acceptance, and political reasons.

Understand the concept of participative leadership and its threshold effect.

Differentiate between types of decisions and their characteristics.

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Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, frequently used in the evaluation of investment opportunities.

Investment

An asset or item acquired with the goal of generating income or appreciation in value.

Outstanding Balance

The amount of money owed on a loan or credit line that remains to be paid off.

Annual Installments

Payments made once a year, often referring to the repayment schedule of a loan or similar financial obligation.