Carphone Warehouse 2007 Annual Report Download - page 51

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www.cpwplc.com
6 Share-based payments continued
e) Fair value models:
Nil cost options with internal performance targets are valued using the market price of a share at the date of grant, discounted for expected future dividends to the
date of exercise. The fair values of other options with internal performance targets are estimated at the date of grant using the Binomial model. The inputs into the
Binomial model are as follows:
2007 2006
Expected volatility (%) 28.6 30.0
Risk free rate (%) 5.3 4.5
Dividend yield (%) 2.0 2.0
Expected volatility has been arrived at by using the historical volatility of the Group’s share price, and the volatility of the share price of similar companies, whose
shares have been listed for longer than those of the Group, over a period comparable with the expected lives of the options. The assumptions made to incorporate
the effects of expected early exercise have been included by assuming an expected option life based on historical exercise patterns for each option scheme.
The fair values of options with external performance targets are estimated at the date of grant using a Monte Carlo model. The model combines the market price
of a share at the date of grant with the probability of meeting performance criteria, based on the historical performance of the Group’s shares. The historical
performance period reflects a volatility of 27.4%. A dividend yield of 2.0% has been assumed in the model.
f) Charge to income statement:
During the period the Group recognised a charge of £10.4m (2006 – £10.7m) in respect of equity settled share-based payments.
7 Interest payable and receivable
Interest payable is analysed as follows:
2007 2006
£’000 £’000
Interest on bank loans and overdrafts 30,283 13,516
Interest cost of forward currency contracts 721 –
Movements in the fair value of forward currency contracts 347 –
Other interest payable 1,062 283
32,413 13,799
Interest receivable is analysed as follows:
2007 2006
£’000 £’000
Interest on cash and cash equivalents 4,457 928
Profit on disposal of available-for-sale investments 1,378 5,953
Interest income from forward currency contracts –769
Movements in the fair value of forward currency contracts –247
Other interest receivable 219 193
6,054 8,090
47
Financial Statements