Lloyd is the CFO for a firm that uses ISOs as part of its executive compensation plan. He receives $150,000 annually, paid semimonthly, in base salary plus 25 shares of the firm's stock per month. The stock is omitted from gross pay calculations and is valued at $52.50 per share and he may exercise his option within five years at $0.10 per share. What is Lloyd's gross pay for mid-October

Lloyd

Gross pay for mid-October is $6,250.

Explanation:

a) Data and Calculations:

Annual base salary = $150,000

Bi-weekly base salary = $6,250 ($150,000/24)

ISO = 25 shares per month valued at $52.50 per share = $1,312.50

Bi-weekly ISO = $656.25 ($1,212.50/2)

Option exercise price = $0.10 per share

b) ISOs mean incentive stock options, which are performance-based compensations to company executives in the form of shares.

c) The calculation of the mid-October gross pay is based on the division of Lloyd's annual base salary by 12 months * 2 (24 mid-months).

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