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Find the value of the employee stock option

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Reference no: EM132955071

Question - Company X is going to issue 2,000 stock option (200,000 shares) on its common stock to the top executives today. The exercise price on the stock options is $20 per share. If past experience dictates that the executives will exercise their option by the 10th year on average and that the variance of stock returns is .25 (annual), calculate the value of these stock options assuming a dividend yield of 1% and a risk free rate of 2%. The stock is trading at $15 per share. The company finds that 85% of options are exercised. Find the value of the employee stock option.

Reference no: EM132955071

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