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  • This topic has 5 replies, 2 voices, and was last updated 1 year ago by Stephen Widberg.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • April 3, 2024 at 4:31 pm #703617
    Sharith
    Participant
    • Topics: 14
    • Replies: 11
    • ☆

    Dear lecturer,

    Before my question, I wish to say many thanks to you and the open tuition fraternity.

    Now my question is this. If you have 10 directors and 4 of them are expected to leave during the 1st year of the 3 years vested period and 2 also leaving in the 2nd year, why is the 2nd year calculations still having 10-2 directors?

    Given that 4 directors have left in the first year, shouldn’t it be 6-2 directors in the 2nd year? I say so because by the 2nd year, it would have been certain (no more estimate or expectation) whether or not those directors have left, and we will therefore have a total of 6-2.

    Thanks.

    April 4, 2024 at 7:40 am #703627
    Stephen Widberg
    Keymaster
    • Topics: 16
    • Replies: 3411
    • ☆☆☆☆☆

    Hi.

    In your scenario I estimate that 6 directors are expected to leave over the vesting period.

    So there are expected to be 4 at the end.

    So my calculation would be based on 4.

    And I agree with you. 🙂

    (If, at the start of the plan, you estimate 6 leavers, then your year 1 calculation would also be based on 4)

    🙂

    April 4, 2024 at 5:02 pm #703650
    Sharith
    Participant
    • Topics: 14
    • Replies: 11
    • ☆

    Thank you for your attention. But if I may restate my question again because I’m not clear yet.

    We have 10 directors and estimates that 4 will leave in the 1st year and 2 will also leave in the year 2nd year over a three year period.

    Shouldn’t the calculations look like this, especially in year 2:

    Year 1
    10-4 × number of shares × share price ×1/3

    Year 2
    6-2 × number of shares × share price × 2/3

    My challenge is that in the lecture, you used the total number of directors throughout the calculations. That is,

    Year 1
    10-4 × number of shares × share price ×1/3

    Year 2
    10-2 × number of shares × share price × 2/3

    Thank you.

    April 5, 2024 at 9:51 am #703679
    Stephen Widberg
    Keymaster
    • Topics: 16
    • Replies: 3411
    • ☆☆☆☆☆

    I think you are looking at OT example 5

    Year 1
    Estimate of TOTAL NUMBER OF DIRECTORS LEAVING OVER 3 YEAR PERIOD = 4

    Year 2
    Estimate of TOTAL NUMBER OF DIRECTORS LEAVING OVER 3 YEAR PERIOD = 2

    Your assumption is that:
    Estimate of TOTAL NUMBER OF DIRECTORS LEAVING OVER 3 YEAR PERIOD = 6 – this is not correct.

    The key word is TOTAL.

    Does that make sense?

    🙂

    April 5, 2024 at 6:48 pm #703705
    Sharith
    Participant
    • Topics: 14
    • Replies: 11
    • ☆

    Okay. Many thanks, Sir.

    April 6, 2024 at 8:16 am #703717
    Stephen Widberg
    Keymaster
    • Topics: 16
    • Replies: 3411
    • ☆☆☆☆☆

    🙂

  • Author
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