Raja received 20 NQOs (each option gives him the right to purchase 15 shares of stock for $10 per share) from his employer at the time he started working, when the stock price was $11 per share. Now that the share price is $20 per share, he intends to exercise all of the options using a same-day sale. What are Raja's after-tax proceeds from the sale if his marginal tax rate is 32 percent?
What will be an ideal response?
$2,040.
The after-tax proceeds are the sales proceeds, $6,000 (300 shares × $20) less cash needed to exercise and taxes are $3,000 (300 shares × $10 strike price) plus taxes of $960 ($3,000 × 32 percent).
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