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Example Company PLC |
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Name |
ESOS 10 |
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Features |
10 year executive option at the money option |
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Black-Scholes valuation - adjusted for dividend |
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Grant Date; |
02 May 2006 |
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Valuation Date ; |
02/05/2006 |
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Input |
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Notes |
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Share price |
s |
£2.000 |
1 |
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Risk-free interest rate |
r |
4.70% |
2 |
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Volatility |
v |
20.00% |
3 |
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Dividend yield |
d |
3.00% |
4 |
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Expected term in years |
t |
7.0 |
5 |
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Exercise price |
x |
£2.000 |
6 |
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Output |
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Black-Scholes value |
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£0.42 |
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As % of share price |
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20.90% |
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Calculations |
ln (S/X) |
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- |
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(r-d)t |
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0.11900 |
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vt^.5 |
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0.52915 |
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-dt |
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- 0.21000 |
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e^-dt |
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0.81058 |
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x=d1 |
x=d2 |
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x |
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0.48946 |
- 0.03969 |
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N(x) |
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0.68774 |
0.48417 |
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Se^-dtN(d1) |
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1.11495 |
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Xe^-r(t)N(d2) |
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0.69686 |
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Notes: |
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1) Share price as at 2 May 2006 being day of grant |
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2) Based on yield attributable on a UK Government strip bond |
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3) Based on historic volatility but rounded up |
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4) Sustainable dividend yield is assumed |
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5) Based on exercise pattern maximum is 10 years |
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6) Exercise price as at 2 May 2006 equal to market value on date of grant |
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