BLAW 100 – Farmer Fabrication issued stock options for 450,000 shares
January 7th, 2018
On October 1, 2016, Farmer Fabrication issued stock options for 450,000 shares to a division manager. The options have an estimated fair value of $10 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 4% in three years. Suppose that after one year, Farmer estimates that it is not probable that divisional revenue will increase by 4% in three years.1.What is the revised estimate of the total compensation?