Series 79 practice questionmediumEnterprise Value vs Equity Value
How are in-the-money employee stock options typically treated in calculating diluted equity value?
- AExcluded, as they are not yet exercised
- BAdded at par value only
- CInclude only if granted in the current year
- DAdjust share count using the treasury stock method✓ Correct answer
Explanation
Why D — Adjust share count using the treasury stock method
In-the-money employee stock options are included in diluted equity value calculations by adjusting the share count using the treasury stock method, which accounts for potential dilution from options exercisable at prices below the current market price.
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