Starwood 2007 Annual Report Download - page 159

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Lattice model weighted average assumptions:
2007 2006 2005
Year Ended December 31,
Dividend yield .............................................. 1.40% 1.41% 1.80%
Volatility:
Near term ................................................ 25% 26% 25%
Long term................................................ 37% 40% 40%
Expected life ............................................... 6yrs 6yrs 6yrs
Yield curve:
6 month ................................................. 5.12% 4.68% 2.80%
1 year . . ................................................. 4.96% 4.66% 2.98%
3 year . . ................................................. 4.55% 4.58% 3.45%
5 year . . ................................................. 4.52% 4.53% 3.66%
10 year . ................................................. 4.56% 4.58% 4.08%
The dividend yield is estimated based on to the current annualized dividend payment and the average price of
the Shares or Corporation Shares, as the case may be, during the prior year.
The estimated volatility is based on a combination of historical share price volatility as well as implied
volatility based on market analysis. The historical share price volatility was measured over an 8-year period, which
is equal to the contractual term of the options. The weighted average volatility for 2007 grants was 30.2%.
The expected life represents the period that the Company’s stock-based awards are expected to be outstanding.
It was determined based on an actuarial calculation which was based on historical experience, giving consideration
to the contractual terms of the stock-based awards and vesting schedules.
The yield curve (risk-free interest rate) is based on the implied zero-coupon yield from the U.S. Treasury yield
curve over the expected term of the option.
The following table summarizes stock option activity for the Company:
Options
(In millions)
Weighted Average
Exercise
Price Per Share
(1)
Outstanding at December 31, 2004 .......................... 33.4 $34.98
Granted ............................................ 4.5 59.14
Exercised ........................................... (11.1) 36.63
Forfeited ........................................... (1.9) 41.57
Outstanding at December 31, 2005 .......................... 24.9 38.09
Granted ............................................ 2.4 59.55
Exercised ........................................... (12.3) 30.74
Adjustment in connection with the Host Transaction ........... 5.0 33.26
Forfeited ........................................... (0.8) 40.87
Outstanding at December 31, 2006 .......................... 19.2 35.40
Granted ............................................ 0.5 64.64
Exercised ........................................... (5.6) 33.38
Forfeited ........................................... (1.3) 44.19
Outstanding at December 31, 2007 .......................... 12.8 $36.60
Exercisable at December 31, 2007 .......................... 7.9 $31.38
F-39
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)