Which of the Following Statements Is Incorrect? Employee Stock Options

question 61

Multiple Choice

Which of the following statements is incorrect? Employee stock options

• A) are not recorded as an expense when granted if they are at or out-of-the money under the intrinsic value method.
• B) will not affect the share price of the company when exercised.
• C) may reduce agency costs by more closely aligning interests of stockholders and managers.
• D) may increase the risk propensity of managers.
• A company's net income is $100,000, and its weighted-average shares outstanding are 20,000. During the year, the company issues 5,000 ESOs at an exercise price of $20.

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Definitions:

Point Q

A hypothetical point used in economic models or graphs to represent a specific position in terms of quantity or quality.

Economy

A framework for creating, distributing, and utilizing goods and services in a specific geographic region.

Economic Growth

A boost in the purchasing power adjusted market value of goods and services an economy creates over time.

Long Run

A period in economics sufficient for all markets to adjust, including production facilities and labor.