DuPont 2008 Annual Report Download - page 97

For purposes of determining the fair value of stock options awards, the company uses the Black-Scholes option
pricing model and the assumptions set forth in the table below. The weighted-average grant-date fair value of options
granted in 2008, 2007 and 2006 was $5.30, $9.47 and $7.28, respectively.
2008 2007 2006
Dividend yield 3.7% 2.9% 3.8%
Volatility 18.86% 21.11% 25.02%
Risk-free interest rate 2.6% 4.7% 4.4%
Expected life (years) 4.5 4.5 4.5
The company determines the dividend yield by dividing the current annual dividend on the company’s stock by the
option exercise price. A historical daily measurement of volatility is determined based on the expected life of the
option granted. The risk free interest rate is determined by reference to the yield on an outstanding U.S. Treasury
note with a term equal to the expected life of the option granted. Expected life is determined by reference to the
company’s historical experience.
Stock option awards as of December 31, 2008, and changes during the year then ended were as follows:
Number of
Shares
(In thousands)
Weighted
Average
Exercise Price
(per share)
Weighted
Average
Remaining
Contractual
Term
(years)
Aggregate
Intrinsic
Value (in
thousands)
Outstanding, December 31, 2007 74,537 $46.66
Granted 8,902 $44.74
Exercised (2,233) $41.42
Forfeited (392) $45.67
Cancelled (4,784) $57.85
Outstanding, December 31, 2008
1
76,030 $45.89 2.75 $ -
Exercisable, December 31, 2008 55,952 $44.55 2.43 $ -
1
Includes 10.2 million options outstanding from the 2002 Corporate Sharing Program grants of 200 shares to all eligible employees at an
option price of $44.50. These options are currently exercisable and expire 10 years from date of grant.
The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value (the difference between
the company’s closing stock price on the last trading day of 2008 and the exercise price, multiplied by the number of
in-the-money options) that would have been received by the option holders had all option holders exercised their in-
the-money options at year end. The amount changes based on the fair market value of the company’s stock. Total
intrinsic value of options exercised for 2008, 2007 and 2006 were $18, $96 and $22, respectively. In 2008, the
company realized a tax benefit of $6 from options exercised.
As of December 31, 2008, $21 of total unrecognized compensation cost related to stock options is expected to be
recognized over a weighted-average period of 1.58 years.
RSUs and PSUs
In 2004, the company began issuing RSUs in addition to stock options. These RSUs serially vest over a three-year
period and, upon vesting, convert one-for-one to DuPont common stock. A retirement eligible employee retains any
granted awards upon retirement provided the employee has rendered at least six months of service following the
grant date. Additional RSUs are also granted periodically to key senior management employees.
These RSUs generally vest over periods ranging from two to five years. The fair value of all stock-settled RSUs is
based upon the market price of the underlying common stock as of the grant date.
F-41
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)