In the Current Tax Year,Ben Exercised an Incentive Stock Option

question 86

True/False

In the current tax year,Ben exercised an incentive stock option (ISO),acquiring stock with a fair market value of $190,000 for $170,000.His AMT basis for the stock is $170,000,his regular income tax basis for the stock is $170,000,and his AMT adjustment is $0 ($170,000 - $170,000).

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Definitions:

Internal Rate of Return

The interest rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equals zero.

Net Present Value

A financial metric used to evaluate the profitability of an investment, calculated by subtracting the present value of cash outflows from the present value of cash inflows over a period of time.

Discount Rate

The interest rate used to discount future cash flows to their present value, often reflecting the risk or cost of capital.

Payback Period

The amount of time it takes for an investment to generate an amount of income or cash equivalent to the cost of the investment.