Incorporate Essay Example | Topics and Well Written Essays - 250 words

Incorporate - Essay Example This price that the option is offered is referred to as a â€Å"grant† price. This â€Å"grant† price is usually the market value of the shares at the time the employees are granted that opportunity to receive the stock option. Those employees that have received the grant hope that the market value of the shares will later increase and thus benefit from the grant. This program is perceived as a flexible way of sharing the company’s ownership with employees. This thus calls for high performance of employees as they feel attached to the company they are working for. It also attracts and retains a motivated workforce. However the option is not a strategy that would work for a company that its future is not certain as members and staff off the company would take that opportunity to sell their shares to avoid total loss of their investment. This can be valued by using the information of the company’s annual report. Using HP as our case study we begin by valuing the employee stock options using the black-Scholes option pricing method. To calculate the black-Scholes value, we combine the information with our estimates of the following