1.On January 1, 2016, Olson Inc. issued stock options for 200,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 6% in three years. Olson initially estimates that it is probable the goal will be achieved. Ignoring taxes, what is reduction in earnings in 2016?

a.$0

b.$200,000

c.$400,000

d.$1,200,000