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On January 1, 2016, Red Inc. issued stock options for 200,000 shares to a division manager. The options have an estimated fair value of $6

On January 1, 2016, Red 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. Red initially estimates that it is probable the goal will be achieved. Ignoring taxes, what is compensation expense for 2016?

$0.
$200,000.
$400,000.
$1,200,000.

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