Under its executive stock option plan,W Corporation granted options on January 1,2016,that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years,but not before December 31,2018 (the vesting date).The exercise price is the market price of the shares on the date of grant,$18 per share.The fair value of the options,estimated by an appropriate option pricing model,is $4 per option.No forfeitures are anticipated.The options are exercised on April 2,2019,when the market price is $21 per share.By what amount will W's shareholder's equity be increased when the options are exercised?
A)$ 60 million.
B)$270 million.
C)$315 million.
D)$330 million.

Question

Quizplus · Accepted Answer

When the options are exercised, the shareholders' equity increases by the total cash received from the exercise of the options. The exercise price is $18 per share, and 15 million shares are purchased, so the increase in equity is 15 million shares * $18 = $270 million.

Under Its Executive Stock Option Plan,W Corporation Granted Options on January