Valuation Methods for Stock-Based Compensation Quiz
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Questions and Answers

What is the method used to determine the fair value of restricted stock units?

  • The Black-Scholes-Merton valuation model
  • The expected life of the option
  • The market value of the common stock on the date of the grant (correct)
  • The exercise price

    • What factors are involved in determining the compensation expense of stock options using the Black-Scholes-Merton valuation model?

  • The expected life of the option, stock price volatility, and risk-free interest rate (correct)
  • The expected life of the option, stock price volatility, and exercise price
  • The expected life of the option, stock price volatility, and forfeiture rate
  • The expected life of the option, stock price volatility, and dividend yield

    • How are forfeitures estimated in the determination of compensation expense for stock options?

  • Forfeitures are estimated at the end of the vesting period and reduce expense retroactively
  • Forfeitures are estimated at the time of grant and reduce expense ratably over the vesting period (correct)
  • Forfeitures are not taken into account in the determination of compensation expense
  • Forfeitures are estimated at the time of exercise and reduce expense immediately

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