Question:
Six years ago, Rollo Inc. granted a nonqualified stock option to Mrs. Jacques to buy 5,000 shares of Rollo stock at $15 per share for six years. At the date of grant, Rollo stock was selling on the AMEX for $14.75 per share. This year, Mrs. Jacques exercised the option when the price was $45.10 per share.
What formulas can I use to determine how much compensation income did Mrs. Jacques recognize in the year the option was granted and then in the year she exercised the option?