Antonio received 40 ISOs (each option gives him the right to purchase 20 shares of Zorro stock for $3 per share) at the time he started working for Zorro Corporation six years ago.  Zorro’s stock price was $3 per share at the time.  Now that Zorro’s stock price is $50 per share, Antonio intends to exercise all of his options and immediately sell all the shares he receives from the options exercise.  

a. What are Antonio’s taxes due on the grant date, the exercise date, and the date the shares are sold assuming his ordinary marginal rate is 32 percent and his long-term capital gains rate is 15 percent?

b. What are Zorro’s tax consequences on the grant date, the exercise date, and the date Antonio sells the shares?

c. What are the cash flow effects of these transactions to Antonio assuming his ordinary marginal rate is 24 percent and his long-term capital gains rate is 15 percent?  

d. What are the cash flow effects to Zorro resulting from Antonio’s option exercise?