Total compensation cost pertaining to the stock options

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Reference no: EM13744725

Under its executive stock option plan, National Corporation granted options on January 1, 2013, that permit executives to purchase 20 million of the company’s $1 par common shares within the next seven years, but not before December 31, 2016 (the vesting date). The exercise price is the market price of the shares on the date of grant, $24 per share. The fair value of the options, estimated by an appropriate option pricing model, is $3 per option. No forfeitures are anticipated.

1) Ignoring taxes, what is the total compensation cost pertaining to the stock options?

Total Compensation Cast = __________ Million

2) Ignoring taxes, what is the effect on earnings in the year after the options are granted to executives?

Effect on Earning: (Decrease by / Increase by / No effect) ___________ Million

Reference no: EM13744725

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