EG Corporation Granted Restricted Stock Units (RSUs) Representing 32 Million

question 4

Essay

EG Corporation granted restricted stock units (RSUs) representing 32 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within four years. After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the shares. The common shares had a market price of $6 per share on the grant date.
Required:
(1.) Ignoring taxes, determine the total compensation cost pertaining to the restricted stock units.
(2.) What is the effect on earnings in the year after the shares are granted to executives?

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Definitions:

Mark-up

Mark-up refers to the amount added to the cost price of goods to cover overhead and profit; it is a percentage of the cost price.

Camping Tents

Portable shelters made of cloth used for outdoor overnight stays, especially in wilderness areas.

Net Cost

The actual cost of a product or service after all discounts, rebates, or allowances have been applied.

Breakeven

A situation where the sum of all costs equals the sum of all revenues, with no profit or loss occurring.