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What are the cash flow effects for barlow corporation

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Question - Haven received 200 NQOs (each option gives him the right to purchase 20 shares of Barlow Corporation stock for $7 per share) at the time he started working for Barlow Corporation three years ago when its stock price was $7 per share. Now that Barlow's share price is $50 per share, he intends to exercise all of his options. After acquiring the 4,000 Barlow shares with his options, he intends to hold the shares for more than one year and then sell the shares when the price reaches $75 per share.

a. What are the cash flow effects of these transactions to Haven assuming his ordinary marginal rate is 30 percent and his long-term capital gains rate is 15 percent?

b. What are the cash flow effects for Barlow Corporation resulting from Haven's option exercise if Barlow's marginal tax rate is 35 percent?

Reference no: EM131996563

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