Question: In 2010 (year 0), Mrs. L exercised a stock option by paying $100 per share for 225 shares of ABC stock. The market price at

In 2010 (year 0), Mrs. L exercised a stock option by paying $100 per share for 225 shares of ABC stock. The market price at date of exercise was $312 per share. In 2017, she sold the 225 shares for $480 per share. Assuming that Mrs. L is in the 35 percent tax bracket, has a 15 percent capital gains rate, and uses a 6 percent discount rate, compute the 2010 NPV of the cash flows from the exercise and sale if:

a. The stock option was nonqualified.

b. The stock option was an ISO.

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a Mrs Ls outofpocket cost of stock 22500 Tax on exercise 47700 35 16695 Cash received on sale of sto... View full answer

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