Dealing with Employee Options
Originally published: 25/10/2016 11:53
Publication number: ELQ-63062-1
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Dealing with Employee Options

Learn how to value employee options and inserting this share in the value of your equity per share.

In this webcast, I look at the process of valuing employee options and incorporating that value into the value of equity per share.

I use Cisco to illustrate.

This program is designed to value options, the exercise of which can create more shares and thus affect the stock price. This is the case with warrants and management options. It is also the case with convertible bonds. As a general rule, using an unadjusted option pricing model to value these options will overstate their value.

Before you run this program, check under preferences (under tools), and calculations, and ensure that there is a check against the iteration box. You will get a circular reasoning warning, but this program needs circular reasoning to compute the option value.

Note: this model is being shared with the authorization of Professor Aswath Damodaran from NYU Stern Business School (

This Best Practice includes
1 Excel Model, 1 Webcast Video

Prof. Aswath Damodaran offers you this Best Practice for free!

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