I would like your thoughts on the following question. My solution was $1,200,000. On Jan 1, 2010 Doe co. issued stock options for 200,000 shares to a manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless revenue increases by 6% in three years. Doe initially estimates that it is probable that the goal will be acheived. Ignoring taxes, what is reduction in earnings in 2010? 

1. $0, 

2. $200,000, 

3. $400,000, 

4. $1,200,000