Concept explainers
Performance-based options
• LO19–2
Refer to the situation described in BE 19–8. Suppose that Farmer initially estimates that it is not probable the goal will be achieved, but then after one year, Farmer estimates that it is probable that divisional revenue will increase by 5% by the end of 2020. What action will be taken to account for the options in 2019 and thereafter?
BE 19–8
Performance-based options
• LO19–2
On October 1, 2018, Farmer Fabrication issued stock options for 100,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 5% in three years. Farmer initially estimates that it is probable the goal will be achieved. How much compensation will be recorded in each of the next three years?
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Intermediate Accounting
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- Chapter 4 Exercise Pg.170 Question 2Perform a financial analysis for a project using the format provided in Figure 4-5. Assume the projected costs and benefits for this project are spread over four years as follows: Estimated costs are $200,000 in year 1 and $30,000 each year in years 2, 3, and 4. Estimated benefits are $0 in year 1 and $100,000 each year in years 2, 3, and 4. Use a 9 percent discount rate and round the discount factors to two decimal places. Create a spreadsheet (or use the business case financials template provided on the companion Web site) to calculate and clearly display the NPV, ROI, and year in which payback occurs. In addition, write a paragraph explaining whether you would recommend investing in this project, based on your financial.arrow_forwardProblem 10-9 Scenario Analysis (LO3) The most likely outcomes for a particular project are estimated as follows: \table[[Unit price:,$70arrow_forwardMa2. Under the SEC rules, which scenario requires a one year cooling off period?arrow_forward
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