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Under its executive stock option plan, National Corporation granted 30 million options on January 1,...

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Accounting

Under its executive stock option plan, National Corporation granted 30 million options on January 1, 2021, that permit executives to purchase 30 million of the companys $1 par common shares within the next eight years, but not before December 31, 2025 (the vesting date). The exercise price is the market price of the shares on the date of grant, $31 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. 1. Ignoring taxes, what is the total compensation cost pertaining to the stock options? 2. Ignoring taxes, what is the effect on earnings in the year after the options are granted to executives?

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