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    Question

    Ms. Sonya received 500 ESOPs at Rs.20 each. The market

    value of the share at that time was Rs. 40, and Rs.50 at vesting time and Rs.75 at exercise time. What is the value of ESOPs for Ms. Sonya?
    A Rs.27,500 Correct Answer Incorrect Answer
    B Rs.15,000 Correct Answer Incorrect Answer
    C Rs.10,000 Correct Answer Incorrect Answer
    D Rs.20,500 Correct Answer Incorrect Answer
    E Rs.37,500 Correct Answer Incorrect Answer

    Solution

    In the context of ESOPs, the benefit to the employee is calculated at the time of exercise . While the Fair Value at Grant of Rs.40 and at vesting of Rs.50  are important for company's accounting for compensation expense, they do not represent the gain to the employee. For the employee, the ESOP gives value as perquisite at time of exercise (Rs.75 here).  Value of ESOP to employee = market value at exercise – cost of ESOP                                            = Rs.75 - Rs.20 per share                                            = Rs.55 per share Total value = 55*500 shares =  Rs.27,500

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