I work for a publicly traded company with a historically low share price. The decline in interest rates should help the company valuation improve over the next few years, but there will be headwinds.
My question is: in lieu of paying the equity portion of my performance compensation in RSU’s, they have offered to make an upfront payment in cash. I understand this is generally preferred for many reasons. The RSU’s would have vested/been paid out equally over a 4 year period. Furthermore, 70% of the equity portion (will use $100k as a round number) is guaranteed, but based on the current stock price, 30% is unlikely to be paid out (at least in the next year or two, and then only if the share price achieves a certain higher threshold).
I’ve been asked to put a number on the cash upfront payment. To that end, I’ve put together an NVP calculation with assumptions on Discount Rate, the future value of the stock in each of the vesting years, and my income tax rate.
1. Should the npv be calculated on the post income tax value of my vested shares x assumed future stock price? Or is it based on the value of the vested shares without deducting any taxes?
2. How much of a discount to the npv would you attribute to the unknown factor of whether an employee will be employed during the full 4 year vesting period? I hope/plan to be, but from an employer’s perspective, I assume that is viewed as a risk and should be baked into the number.
Thank you
My question is: in lieu of paying the equity portion of my performance compensation in RSU’s, they have offered to make an upfront payment in cash. I understand this is generally preferred for many reasons. The RSU’s would have vested/been paid out equally over a 4 year period. Furthermore, 70% of the equity portion (will use $100k as a round number) is guaranteed, but based on the current stock price, 30% is unlikely to be paid out (at least in the next year or two, and then only if the share price achieves a certain higher threshold).
I’ve been asked to put a number on the cash upfront payment. To that end, I’ve put together an NVP calculation with assumptions on Discount Rate, the future value of the stock in each of the vesting years, and my income tax rate.
1. Should the npv be calculated on the post income tax value of my vested shares x assumed future stock price? Or is it based on the value of the vested shares without deducting any taxes?
2. How much of a discount to the npv would you attribute to the unknown factor of whether an employee will be employed during the full 4 year vesting period? I hope/plan to be, but from an employer’s perspective, I assume that is viewed as a risk and should be baked into the number.
Thank you
Statistics: Posted by RaynaK33 — Fri Jan 24, 2025 2:10 pm — Replies 0 — Views 106