Share-Based Payment > Best Practice Series ESO Valuation Disclosure - Dow 30 for FY2011 www.fintools.com
Expected Contractual Expected Vesting ESO Fair Exercise Forfeiture Valuation Granted Interest Dividend
Symbol Company Name HQ Auditor Volatility Term (y) Term (y) Period (y) Value ($) Multiple Rate Model (millions) Rate Yield Comments
AA Alcoa Inc. PA PwC 43.00% 10 5.8 3 4.96 1.45 5.00% Lattice SOEF 4.500 3.44% 0.90% Exp Vola range 36-43%; Exer Multiple based on hist avg; Int Rate range 0.19-3.44% 
AXP American Express Company NY PwC 40.00% 10 6.2 4 16.21     B-S-M 1.197 2.30% 1.60% Exp Vola based on hist and implied vola
BA The Boeing Company IL Deloitte 29.80% 10 6.0 3 17.96 Black-Scholes 5.659 2.50% 2.30% Exp Vola based on hist and implied vola; Exp Term SAB 110
BAC Bank of America Corporation NC PwC - - - - -     - - - - No options granted since 2008
CAT Caterpillar Inc. IL PwC 32.70% 10 8.0 3 36.73 Lattice SOEF 2.960 3.51% 2.20% Exp Vola range 20.9-45.4%; Int Rate range 0.25-3.51%; Exp Term b/o hist data
CSCO Cisco Systems, Inc. CA PwC - - - - -     - - - - No ESOs granted in 2011, used lattice-binomial model for prev FV calc
CVX Chevron Corporation CA PwC 31.00% 10 6.2 3 21.24 Black-Scholes 14.260 2.60% 3.60% Exp Vola based on hist vola; Exp Term based on hist exer and post-vest cancellation
DD E.I. du Pont de Nemours and Co DE PwC 33.26% 7 5.3 3 12.32     Black-Scholes 3.739 2.30% 3.20% Exp Vola based on hist daily vola; Exp Term is based on hist experience
DIS The Walt Disney Company CA PwC 28.00% 10 - 4 10.96 1.40 2.50% Lattice SOEF 11.000 3.20% 1.15% Exp Vola based on hist and implied vola
GE General Electric Company CT KPMG 30.00% 10 7.7 5 4.00     Black-Scholes 105.944 2.60% 3.90% Exp Vola based on hist and implied vola; Dividend Yield based on 5-year hist avg
HD The Home Depot, Inc. GA KPMG 27.30% 10 5.0 4 7.42 Black-Scholes 3.236 2.00% 2.70% Provides both incentive and non-qualified stock options
HPQ Hewlett-Packard Company CA E&Y 41.00% 8 5.3 4 7.85     Black-Scholes 18.804 1.20% 1.97% Expected Vola based on implied; Exp Term based on hist data and post-vest behavior
IBM International Business Machines NY PwC - - - - - - - - - ESOs not granted for the past 3 yrs, outstanding ESOs valuated with B-S
INTC Intel Corporation CA E&Y 27.00% 7 5.4 4 3.91     Black-Scholes 14.700 2.20% 3.40% Exp Vola based on implied vola; Exp Term based on hist option exercise data
JNJ Johnson & Johnson NJ PwC 18.20% 10 6.0 4 7.47 Black-Scholes 9.530 2.41% 3.60% Exp Vola 4-yr daily hist vola, 5-week avg implied vola of 2-yr opts; Exp Term hist exp
JPM JP Morgan Chase & Co. NY PwC 34.00% 10 6.5 5 13.04     Black-Scholes 15.300 2.58% 2.20% Granted (ESOs and SARs), Exp Vola based on implied vola; Exp Term hist exp
KFT Kraft Foods Inc. IL PwC 18.92% 10 6.0 3 3.84 Black-Scholes 16.320 2.34% 3.72% Exp Vola based on hist vola
KO The Coca-Cola Company GA E&Y 19.00% 10 5.0 4 9.28     B-S-M 26.000 2.30% 2.70% Exp Vola based on hist and implied vola; Exp Term based on hist exer behavior
MCD McDonald's Corporation IL E&Y 21.50% 10 6.3 4 12.18 Closed-Form 3.900 2.80% 3.20% Exp Vola based on hist vola; Exp Term based on historical trends
MMM 3M Company MN PwC 22.00% 10 6.0 3 16.10     Black-Scholes 5.515 2.80% 2.60% Exp Vola avg of hist vola (1-yr, rolling, exp life) and implied vola; exp term from hist
MRK Merck & Co., Inc. NJ PwC 23.40% 10 7.0 3 5.39 Black-Scholes 8.209 2.50% 4.30% Exp Vola based on hist and implied vola; Contractual Term range 7-10 yrs
MSFT Microsoft Corporation WA Deloitte - - - - -     - - - - No ESOs granted in 2011 (including in conj with business aquisition)
PFE Pfizer Inc. NY KPMG 25.55% 10 6.3 3 3.15 B-S-M 66.850 2.59% 4.14% Exp Vola uses hist and implied vola; Exp Term uses hist exer and post-vest forf
PG The Procter & Gamble Company OH Deloitte 16.00% 10 8.8 3 11.09     Lattice SOEF 29.141 3.40% 2.40% Exp Vola range 14-18%; Int Rate range 0.3-3.7%; Exercise behavior based on hist
T AT&T Inc. TX E&Y 14.74% 10 7.0 - 1.57 Black-Scholes 2.00 2.91% 5.96% Exp Term based on historical exercise experience
TRV The Travelers Companies, Inc. NY KPMG 28.20% 10 6.0 3 12.94     Black-Scholes 2.380 2.62% 2.70% Exp Vola range 28-28.6%; Int Rate range 1.19-2.62%; Exp Div range $1.44-1.64
UTX United Technologies Corporation CT PwC 26.00% 10 8.0 3 20.26 Binomial Lattice 0.320 3.50% 2.40% Exp Vola range 26-32%; Exp Term range 7.5-8.0 years; Int Rate range 0.1-3.5%
VZ Verizon Communications Inc. NY E&Y - - - - -     - - - - No options granted since 2004, Outstanding options valued with B-S
WMT Wal-Mart Stores, Inc. AR E&Y 17.60% 10 3.0 5 9.61 B-S-M 2.042 1.30% 2.90% Exp Vola based on hist vola; Exp Term based on hist exercise and expiration activity
XOM Exxon Mobil Corporation TX PwC - - - - -     - - - - No options granted since 2003
Average Calculations 27.01% 9.7 6.2 3.6 2.58% 2.91%
Minimum 14.74% 7.0 3.0 3.0 1.20% 0.90%
Maximum 43.00% 10.0 8.8 5.0 3.51% 5.96%
Key
B-S-M:  Black-Scholes-Merton Closed-Form: Model or formula similar to B-S-M Hist Vola: Historical Volatility
SOEF:  Sub Optimal Exercise Factor Exp Vola: Expected Volatilty Exp Term: Expected Term
Source: Company 10-K Reports for FY2011
Prepared by: Andrew Abrams, Daniel Crabtree and Scott Michaud, CEP
Date: September 5, 2013
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