On January 1, 2016, Red Inc. issued stock options for 230,000 shares to a division manager. The options have an estimated fair value of $7 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 7% in three years. Red initially estimates that it is probable the goal will be achieved. Ignoring taxes, what is compensation expense for 2016? (Round your answer to the nearest dollar amount.)

$ 0.

$ 1,610,000.

$ 230,000.

$ 536,667.