The Procter & Gamble Company (P&G)

The financial statements of (P&G) are presented in Appendix 5B or can be accessed on the KWW website.

Instructions Refer to P&G’s financial statements and 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 during 2004 under the plan?

(2) How many options were exercisable at June 30, 2004?

(3) How many options were exercised in 2004, and what was the average price of those exercised?

(4) What was the range of exercise prices for options outstanding at June 30, 2004?

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

(6) To what accounts are the proceeds from these option exercises credited?

(7) What was the number of outstanding options at June 30, 2004, and at what average exercise price?

(b) What number of diluted weighted average common shares outstanding was used by P&G in computing earnings per share for 2004, 2003, and 2002? What was P&G’s diluted earnings per share in 2004, 2003, and 2002?

(c) What would be the amount of compensation expense reported in 2004 for P&G if it had used the fair value method? (Hint: See Note 1.)