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It is question from Kaplan chapter Share based paymeny
in question a 6 years are given and 4 year is vestin period and last 2 years are exercise period in these years fv per SAr is 12 and 11 reaspectively and Intrinsic value per SAR is 10 and 11 respectively.In answer
428 actual employees who exercise their rights and 200 shares alloted and $12 fv per SAR
(428*50%*200*12fv per SAR)
(428*50%*200*10intrinsic value per SAR)My question is why 50% is used to multiply???
It is cash settled share based payment transaction method.
Is it because this is the first year of the two year exercise period?
How does the Kaplan book explain it (I don’t have a copy)!
This looks very strongly to me like you have missed an important piece of information! Does it say anywhere in the question that “of the 428 employees, it is anticipated that half will exercise the option in the first year and the remainder in the second year”?
Frankly, I’m struggling without the benefit of having the question in front of me!
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