iRobot 2010 Annual Report Download - page 109

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which no incremental compensation expense was realized) and December 27, 2008 was computed on the grant date
using the Black-Scholes option-pricing model with the following assumptions:
Fiscal Year Ended
January 1,
2011
Fiscal Year Ended
January 2,
2010
Fiscal Year Ended
December 27,
2008
Risk-free interest rate ........... 1.27% — 2.28% 1.45% — 2.50% 2.24% — 3.45%
Expected dividend yield ......... — — —
Expected life ................. 4.00 — 4.75 years 3.50 — 4.75 years 3.50 — 4.75 years
Expected volatility . ............ 57.0% — 62.0% 55.0% — 56.5% 55.0%
The risk-free interest rate is derived from the average U.S. Treasury constant maturity rate, which approx-
imates the rate in effect at the time of grant, commensurate with the expected life of the instrument. The dividend
yield is zero based upon the fact the Company has never paid and has no present intention to pay cash dividends. The
expected term calculation is based upon the simplified method provided under the relevant authoritative guidance,
the expected term is developed by averaging the contractual term of the stock option grants (7 or 10 years) with the
associated vesting term (typically 4 to 5 years). Given the Company’s initial public offering in November 2005 and
the resulting short history as a public company, the Company could not rely solely on company specific historical
data for purposes of establishing expected volatility. Consequently, prior to 2010, the Company performed an
analysis that included company specific historical data combined with data of several peer companies with similar
expected option lives to develop expected volatility assumptions. During 2010, the Company began to rely solely on
company specific historical data for purposes of establishing expected volatility.
Based upon the above assumptions, the weighted average fair value of each stock option granted for the fiscal
years ended January 1, 2011, January 2, 2010 (excluding the new options issued in conjunction with the stock option
exchange program for which no incremental compensation expense was realized) and December 27, 2008 was
$8.24, $4.91 and $7.12, respectively.
63
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Form 10-K