On January 1, Year 1 , Chris Inc. issued stock options for 400,000 shares to a division manager. The options have an estimated fair value of $3 each. To provide additional incentive for managerial achievement, the options are not exercisable until and unless divisional revenue increases by 6% after three years. Chris Inc. initially estimates that it is probable the goal will be achieved. Ignoring taxes, what is compensation expense for Year 1? a. $0. b. $200,000. c. $400,000. d. $1,200,000