Employee Stock Options at Microsoft Corporation

Case Solution

Richard Brownlee, Luann J. Lynch, Robert Blair
Darden School of Business ()

In this case, students will need to perform an analysis of Microsoft Corporation’s financial statements and footnotes to understand the impact of using stock options. In addition to a general discussion of Microsoft’s use of stock options and its impact on financial statements, students will focus particularly on Microsoft’s mega-grant of 70 million options in April 2000 following a significant drop in the Microsoft’s share price. The main topics students should examine are (1) differences in intrinsic value and fair value financial reporting, (2) the impact of stock options on the company’s financial statements, (3) profit from the income tax on stock options and (4) the net cost or benefit to Microsoft of granting stock options.

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