In its 10-Q dated November 2, 2007, Dell, Inc., had outstanding employee stock options representing over 272

Question:

In its 10-Q dated November 2, 2007, Dell, Inc., had outstanding employee stock options representing over 272 million shares of its stock. Dell accountants estimated the value of these options using the Black-Scholes-Merton formula and the following assumptions:

S = current stock price = $30.05

K = option strike price = $32.16

r = risk-free interest rate = .043

( = stock volatility = .29

T = time to expiration = 3.5 years

What was the estimated value of these employee stock options per share of stock? Note: Dell pays no dividends.

Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.