Free Cash Flows Problem
Not what you're looking for?
Now FASB required that all employee stock options should be expensed on income statement. On Jan. 2005, AA company granted total $100,000 (fair value) of stock options to the employee. The exercise price is equal to the market price at the grant time. The employees cannot exercise the options until 2007. According to the new requirement, the company should record an expense $50,000 for 2005 and $50,000 for 2006. During 2008, all options are exercised. What is the effect on the free cash flows for 2005?
A. decrease
B. not determinable
C. increase
D. no effect
Purchase this Solution
Solution Summary
This solution explains the effect on free cash flows for 2005 for AA company.
Solution Preview
A. decrease
Several items are deducted from free cash flow, which include interest, taxes, capital spending, and dividends to preferred stockholders. Free cash ...
Purchase this Solution
Free BrainMass Quizzes
Income Streams
In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.
Motivation
This tests some key elements of major motivation theories.
Production and cost theory
Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.