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60
Archer Daniels Midland Company
Notes to Consolidated Financial Statements (Continued)
Note 9.
Shareholders’ Equity (Continued)
The fair value of each option grant is estimated as of the date of grant using the Black-Scholes single option
pricing model. The volatility assumption used in the Black-Scholes single option pricing model is based on the
historical volatility of the Company’s stock. The volatility of the Company’s stock was calculated based upon
the monthly closing price of the Company’s stock for the period immediately prior to the date of grant
corresponding to the average expected life of the grant. The average expected life represents the period of time
that option grants are expected to be outstanding. The risk-free rate is based on the rate of U.S. Treasury zero-
coupon issues with a remaining term equal to the expected life of option grants. The assumptions used in the
Black-Scholes single option pricing model are as follows.
2009
2008
2007
Dividend yield
2%
1%
1%
Risk-free interest rate
3%
5%
5%
Stock volatility
30%
30%
30%
Average expected life (years)
8
8
8
A summary of option activity during 2009 is presented below:
Shares
Weighted-Average
Exercise Price
(In thousands, except per share amounts)
Shares under option at June 30, 2008
8,949
$23.79
Granted
3,440
26.03
Exercised
(1,512)
12.96
Forfeited or expired
(168)
22.86
Shares under option at June 30, 2009
10,709
$26.05
Exercisable at June 30, 2009
3,145
$23.47
The weighted-average remaining contractual term of options outstanding and exercisable at June 30, 2009, is 7
years and 6 years, respectively. The aggregate intrinsic value of options outstanding and exercisable at
June 30, 2009, is $8 million and $10 million, respectively. The weighted-average grant-date fair values of
options granted during 2009, 2008, and 2007, were $7.81, $12.60, and $16.42 respectively. The total intrinsic
values of options exercised during 2009, 2008, and 2007, were $17 million, $34 million, and $41 million,
respectively. Cash proceeds received from options exercised during 2009, 2008, and 2007, were $11 million,
$20 million, and $20 million, respectively.
At June 30, 2009, there was $33 million of total unrecognized compensation expense related to option grants.
Amounts to be recognized as compensation expense during the next five fiscal years are $14 million, $10
million, $6 million, $2 million, and $1 million, respectively.