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WDC » Topics » Fair Value Disclosure - Binomial Model

These excerpts taken from the WDC 10-K filed Aug 20, 2008.
Fair Value Disclosure — Binomial Model
 
The fair value of stock options granted during 2008, 2007 and 2006 was estimated using a binomial option pricing model. The binomial model requires the input of highly subjective assumptions including the expected stock price volatility, the expected price multiple at which employees are likely to exercise stock options and the expected employee termination rate. The Company uses historical data to estimate option exercise, employee termination, and expected stock price volatility within the binomial model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
 
The fair value of stock options granted during the three years ended June 27, 2008 was estimated using the following weighted average assumptions:
 
             
    2008   2007   2006
 
Suboptimal exercise factor
  1.61   1.62   1.58
Range of risk-free interest rates
  1.57% to 4.38%   4.48% to 5.12%   4.01% to 5.21%
Range of expected volatility
  0.33 to 0.67   0.34 to 0.79   0.38 to 0.82
Weighted average expected volatility
  0.48   0.59   0.67
Post-vesting termination rate
  5.26%   5.34%   14.00%
Dividend yield
  —   —   —
Fair value
  $9.65   $8.18   $7.11
 
The weighted average expected term of the Company’s stock options for 2008, 2007 and 2006 was 5.29 years, 5.34 years and 4.32 years, respectively.
 
Fair
Value Disclosure — Binomial Model


 



The fair value of stock options granted during 2008, 2007 and
2006 was estimated using a binomial option pricing model. The
binomial model requires the input of highly subjective
assumptions including the expected stock price volatility, the
expected price multiple at which employees are likely to
exercise stock options and the expected employee termination
rate. The Company uses historical data to estimate option
exercise, employee termination, and expected stock price
volatility within the binomial model. The risk-free rate for
periods within the contractual life of the option is based on
the U.S. Treasury yield curve in effect at the time of
grant.


 



The fair value of stock options granted during the three years
ended June 27, 2008 was estimated using the following
weighted average assumptions:


 

























































































             

 

 

2008

 

2007

 

2006
 


Suboptimal exercise factor


 

1.61

 

1.62

 

1.58


Range of risk-free interest rates


 

1.57% to 4.38%

 

4.48% to 5.12%

 

4.01% to 5.21%


Range of expected volatility


 

0.33 to 0.67

 

0.34 to 0.79

 

0.38 to 0.82


Weighted average expected volatility


 

0.48

 

0.59

 

0.67


Post-vesting termination rate


 

5.26%

 

5.34%

 

14.00%


Dividend yield


 

—

 

—

 

—


Fair value


 

$9.65

 

$8.18

 

$7.11






 



The weighted average expected term of the Company’s stock
options for 2008, 2007 and 2006 was 5.29 years,
5.34 years and 4.32 years, respectively.


 




This excerpt taken from the WDC 10-K filed Aug 28, 2007.
Fair Value Disclosure — Binomial Model
 
The fair value of stock options granted for the years ended June 29, 2007, June 30, 2006 and all options granted between January 1, 2005 and July 1, 2005 was estimated using a binomial option pricing model. The binomial model requires the input of highly subjective assumptions including the expected stock price volatility, the expected price multiple at which employees are likely to exercise stock options and the expected employee forfeiture rate. The Company uses historical data to estimate option exercise, employee termination, and expected stock price volatility within the binomial model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
 
The fair value of stock options granted during the three years ended June 29, 2007 was estimated using the following weighted average assumptions:
 
             
    2007   2006   2005
 
Suboptimal exercise factor
  1.62   1.58   1.79
Range of risk-free interest rates
  4.48% to 5.12%   4.01% to 5.21%   3.34% to 4.46%
Range of expected volatility
  0.34 to 0.79   0.38 to 0.82   0.43 to 0.84
Weighted average expected volatility
  .59   .67   .70
Post-vesting termination rate
  5.34%   14.00%   13.54%
Expected term (in years)
  5.34   4.32   3.82
Dividend yield
  —   —   —
Fair value
  $8.18   $7.11   $4.86
 
This excerpt taken from the WDC 10-K filed Nov 20, 2006.
Fair Value Disclosure — Binomial Model
 
The fair value of stock options granted for the year ended June 30, 2006, was estimated using a binomial option pricing model. For all options granted between January 1, 2005 and June 30, 2006, the pro forma income per share information was estimated using a binomial model. The binomial model requires the input of highly subjective assumptions including the expected stock price volatility, the expected price multiple at which employees are likely to exercise stock options and the expected employee forfeiture rate. The Company uses historical data to estimate option exercise, employee termination, and expected stock price volatility within the binomial model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
 
The fair value of stock options granted during the year ended June 30, 2006 was estimated using the following weighted average assumptions:
 
     
    June 30, 2006
 
Suboptimal exercise factor
  1.58
Range of risk-free interest rates
  4.01% to 5.21%
Range of expected volatility
  0.38 to 0.82
Weighted average expected volatility
  .67
Post-vesting termination rate
  14.00%
Dividend yield
  —
Fair value
  $7.11
 
The fair value of stock options granted during the six months ended July 1, 2005 was estimated using the following weighted average assumptions:
 
     
    July 1, 2005
 
Suboptimal exercise factor
  1.79
Range of risk-free interest rates
  3.34% to 4.46%
Range of expected volatility
  0.43 to 0.84
Weighted average expected volatility
  .70
Post-vesting termination rate
  13.54%
Dividend yield
  —
Fair value
  $4.86
 

EXCERPTS ON THIS PAGE:

10-K (2 sections)
Aug 20, 2008
10-K
Aug 28, 2007
10-K
Nov 20, 2006

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