Scenario 1 At January 1, 2024, Firm X grants 10 million options to key executives. The options permit recipients to acquire 10 million of the company's $1 par common shares within the next eight years, but not before December 31, 2027 (the vesting date). The exercise price is the market price of the shares on the date of grant, $35 per share. The fair value of the options, estimated by an appropriate option pricing model, is $8 per option. Scenario 2 A forfeiture rate of 5% is expected. Scenario 3 A forfeiture rate of 5% is expected. During the third year, firm X revises its estimate of forfeitures from 5% to 10%. Scenario 4 In 2026, options with a fair value of $8 million when granted are forfeited due to executive turnover. Scenario 5 Half the shares (5 million) are exercised on July 11, 2030, when the market price is $50 per share. Assume no forfeitures. (scenario 1) Scenario 6 The remaining 5 million options are expired without being exercised.

At January 1, 2024, Firm X grants 10 million options to key executives. - The options permit recipients to acquire 10 million of the company's $1 par common shares within the next eight years, but not before December 31, 2027 (the vesting date). - The exercise price is the market price of the shares on the date of grant, $35 per share. - The fair value of the options, estimated by an appropriate option pricing model, is $8 per option. Scenario 2 A forfeiture rate of 5% is expected. Scenario 3 A forfeiture rate of 5% is expected. During the third year, firm X revises its estimate of forfeitures from 5% to 10%. Scenario 4 In 2026, options with a fair value of $8 million when granted are forfeited due to executive turnover. Scenario 5 Half the shares ( 5 million) are exercised on July 11,2030 , when the market price is $50 per share. Assume no forfeitures. (scenario 1) Scenario 6 The remaining 5 million options are expired without being exercised