The financial statements of Procter & Gamble (P&G) can be accessed at the book’s website.

Instructions

Refer to P&G’s financial statements and the accompanying notes to answer the following questions.

(a) Under P&G’s stock-based compensation plan, stock options are granted annually to key managers and directors.

(1) How many options were granted under the plan during 2006?

(2) How many options were exercisable at June 30, 2006?

(3) How many options were exercised in 2006, and what was the average price of those exercised?

(4) How many years from the grant date do the options expire?

(5) What was the number of outstanding options at June 30, 2006, and at what average exercise price?

(b) What kind of pension plan does P&G provide its employees in the United States?

(c) What was P&G’s pension expense for 2006, 2005, and 2004 for the United States?

(d) What is the impact of P&G’s pension plan for 2006 on the company’s financial statements?

(e) What information does P&G provide on the target allocation of its pension assets? (Compare the asset allocation for “Pensions” and “Other Retiree Benefits.”) How do the allocations relate to the expected returns on these assets?