Best Buy 2007 Annual Report Download - page 93

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$ in millions, except per share amounts
78
Performance-Based Share Awards
The fair value of performance-based share awards is determined based on the closing market price of our stock on the date
of grant. A summary of the status of our performance-based nonvested share awards at March 3, 2007, and changes during
fiscal 2007, is as follows:
Performance-Based Share Awards Shares
Weighted-
Average
FairValue
per Share
Outstanding at February 25, 2006 184,000 $41.07
Granted 557,000 53.08
Vested ——
Forfeited/Canceled (61,000) 51.45
Outstanding at March 3, 2007 680,000 $49.98
We recognized $9 of expense in fiscal 2007 for
performance-based share awards. No performance-based
share awards vested during fiscal 2007. At March 3, 2007,
there was $23 of unrecognized compensation expense
related to performance-based nonvested share awards that
is expected to be recognized over a weighted-average
period of 2.2 years.
ESPP
The fair value of stock-based compensation expense associated with our ESPP was estimated on the purchase date using the
Black-Scholes option-pricing valuation model, with the following assumptions:
Valuation Assumptions
March 3,
2007
Feb.25,
2006
Feb.26,
2005
Risk-free interest rate(1) 5.0% 3.5% 1.5%
Expected dividend yield 0.7% 0.8% 0.8%
Expected stock price volatility(2) 33% 32% 31%
Expected life of ESPP options (in months)(3) 666
(1) Based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of ESPP shares.
(2) We use an outside valuation advisor to assist us in projecting expected stock price volatility. We consider both the historical volatility of
our stock price as well as implied volatilities from exchange-traded options on our stock.
(3) Based on semi-annual purchase period.
In fiscal 2007, 2006 and 2005, 1.2 million, 1.1 million
and 1.2 million shares, respectively, were purchased
through the ESPP. The weighted-average purchase date fair
values of ESPP shares purchased during fiscal 2007, 2006
and 2005, were $13.97, $9.13 and $8.50, respectively. At
March 3, 2007, and February 25, 2006, ESPP participants
had accumulated approximately $22 and $18, respectively,
to purchase our common stock.