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taxon corp. granted restricted stock units (rsus) representing 60 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within five years. after the recipients of the rsus satisfy the vesting requirement, the company will distribute the shares. the common shares had a market price of $11 per share on the grant date. ignoring taxes, what is the effect on earnings in the year after the shares are granted to executives?



Answer :

The effect on earnings in the year after shares are granted to executives is $132

The market price of common shares = $11 per share

Number of common shares granted by RSUs = 60 million

Vesting Period = 5 years

Calculating the total market value of common stock issued

= Number of common shares granted by RSUs × Market price of common shares

= 60 × 11

= 660

Calculating, the effect on earnings in the year after the shares are granted to executives

= Total market value of common stock issued / Vesting Period

= 660 / 5

= 132

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