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.

---

Definitions:

Social Phobia

Extreme fear and/or avoidance of social situations.

Extreme Fear

A very intense and overwhelming sense of dread or terror that can significantly impact a person's psychological and physiological state.

Avoidance

The action of keeping away from or not doing something, often as a way to deal with fear or anxiety.

Generalized Anxiety Disorder

Anxiety not focused on any single target.