Intel Corporation reported the following in its 2012 10-K report.

Required

a. What did Intel expense for share-based compensation for 2012? How many options did Intel grant in 2012? Compute the fair value of all options granted during 2012. Why do the fair value of the option grants and the expense differ?

b. Intel used the Black-Scholes formula to estimate fair value of the options granted each year. How did the change in volatility from 2011 to 2012 affect share-based compensation in 2012? What about the change in risk-free rate?

c. How many options were exercised during 2012? Estimate the cash that Intel received from its employees when these options were exercised.

d. What was the intrinsic value per share of the options exercised in 2012? If employees who exercised options in 2012 immediately sold them, what "profit" did they make from the shares? (Hint: Assume that Intel grants options at-the-money.)

e. The tax benefit that Intel will receive on the options exercised is computed based on the intrinsic value of the options exercised. Estimate Intel's tax benefit from the 2012 option exercises assuming a tax rate of \(37 \%\)

f. What was the average exercise price of the 19.3 million options expired in 2012? Explain what benefit the employees lost by not exercising their options.

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Share-Based Compensation Share-based compensation recognized in 2012 was $1.1 billion ($1.1 billion in 2011 and $917 million in 2010)... .During 2012, the tax benefit that we realized for the tax deduction from share-based awards totaled $510 million ($327 million in 2011 and $266 million in 2010). ... We use the Black-Scholes option pricing model to estimate the fair value of options granted under our equity incentive plans and rights to acquire stock granted under our stock purchase plan. We based the weighted average estimated value of employee stock option grants and rights granted under the stock purchase plan, as well as the weighted average assumptions used in calculating the fair value, on estimates at the date of grant, as follows: Stock Options 2012 $4.22 5.3 2011 2010 $3.91 $4.82 5.4 4.9 2.2% 2.5% 27% 28% 3.4% 2.7% Stock Purchase Plan 2011 2010 $4.69 $4.71 0.5 0.5 0.2% 26% 3.6% 2012 $5.47 0.5 0.1% 24% 3.3% Estimated values Expected life (in years).. Risk-free interest rate... 1.0% Volatility..... 25% Dividend yield.. 3.3% Additional information with respect to stock option activity is as follows: 0.2% 32% 3.1%