Fill out the Excel below:
Assume the following:
1. The award is tax deductible.
2. Taxes due are paid in cash immediately.
3. To avoid dilution, the company buys back shares in the market
on the same date that the employee exercises the options. However,
the options are still equity classified because the entity does not
commit to buy back shares from the employees. It chooses to buy
them back in the market at its discretion.
Fill Out The Excel Below Assume The Following 1 The Award Is Tax Deductible 2 Taxes Due Are Paid In Cash Immediatel 1 (29.51 KiB) Viewed 43 times
Y1 Y2 Y3 Employee Taxable income Tax due Tax Y1 Employer Book Income statement Revenues Compensation expense = PBT Y1 Y2 Y3 300.00 300.00 300.00 Y2 #### #### Y3 #### Revenues Stock option deduction = Taxable income Effective tax rate = Net income Balance sheet Y1 Y2 Y3 Check Direct cash flows Receipts from customers Y1 Y2 Y3 - Operating cash flows = Financing cash flow = Net cash flows Indirect OCF Y1 Y2 Y3 = Operating cash flow Check
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