Question: In accounting for stock-based compensation, what interest rate is used to discount both the exercise price of the option and the future dividend stream? a.

In accounting for stock-based compensation, what interest rate is used to discount both the exercise price of the option and the future dividend stream?

a. The firm’s known incremental borrowing rate.

b. The current market rate that firms in that particular industry use to discount cash flows.

c. The risk-free interest rate.

d. Any rate that firms can justify as being reasonable.

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