a13toptalent

a13toptalent - Autumn 2011 Managerial Finance Prof....

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Autumn 2011 Managerial Finance Prof. Francisco Pérez-González Retaining Top Talent Read and prepare: Retaining Top Talent: Andrea Korbes and Yahoo. (in the course reader). Big picture question: What is the value of employee stock options? For firms? Employees? Additional Assumptions: 1. Assume Andrea stays with Yahoo at least until 2015. 2. Andrea will hold all of her options until the expiration date and then exercise them if and only if they are in the money at expiration. 3. The forecasted annualized volatility of Yahoo’s stock returns is 38.5%. 4. Yahoo will pay no dividends before 2015. Questions: 1. What is the total value of Andrea’s options according to the Black- Scholes formula? 2. Is the Black-Scholes implicit value an appropriate estimate of the monetary cost of the options to Yahoo’s shareholders? Why or why not? If not, is the cost to shareholders larger or smaller than the value derived using the Black-Scholes formula? 3.
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This note was uploaded on 01/08/2012 for the course MS&E 245G taught by Professor Perez-gonzalas during the Fall '11 term at Stanford.

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a13toptalent - Autumn 2011 Managerial Finance Prof....

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