The Following Information Relates to Questions

question 28

Multiple Choice

The following information relates to questions
Viola Ltd has granted each of its 10 senior executives a choice between receiving a cash payment equivalent to 1000 shares or receiving 1200 share. The grant is conditional on the completion of three years’ service with the company. If the share alternative is chosen, the shares must be held for two years after vesting date. At grant date the company’s share price is £25 per share. At the end of years 1, 2 and 3 the share price is £27, £28 and £30 respectively. The company does not expect to pay dividends in the next three years. After taking into account the effect of post-vesting transfer restrictions the company estimates the grant-date fair value of the share alternative is £24 per share.
-What is the fair value of the equity alternative?

• A) £240 000
• B) £250 000
• C) £288 000
• D) £300 000

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Definitions:

Self-Esteem

A person’s attitude toward him- or herself.

Lowest Self-Esteem

Refers to the lowest level of an individual's appraisal of their own worth or value.

Reference-Group Effect

When people compare themselves to other people they know when completing personality questionnaires.

Personality Test

A questionnaire or other standardized instrument designed to reveal aspects of an individual's character or psychological makeup.