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:

Archival research

Archival research involves the study of existing records or data sets to find answers to research questions, without the need for generating new data through experiments or surveys.

Politicians

Individuals who are actively involved in the governance and decision-making processes of a country or community, often holding a public office.

Cross-cultural study

Research that compares cultural groups on some psychological variable of interest to understand cultural influences on human behavior and attitudes.

Mortality

The incidence or frequency of death within a population over a specified period.