SanDisk 2007 Annual Report Download - page 120

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expected volatility is based on the implied volatility of its traded options in accordance with the guidance provided
by the United States Securities and Exchange Commission’s Staff Accounting Bulletin No. 107 to place exclusive
reliance on implied volatilities to estimate the Company’s stock volatility over the expected term of its awards. The
Company has historically not paid dividends and has no foreseeable plans to issue dividends. The risk-free interest
rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term.
Valuation Assumptions. The fair value of the Company’s stock options granted to employees, officers and
non-employee board members and Employee Stock Purchase Plans (“ESPP”) shares granted to employees for the
years ended December 30, 2007, December 31, 2006 and January 1, 2006 was estimated using the following
weighted average assumptions:
December 30,
2007
December 31,
2006
January 1,
2006
Option Plan Shares
Dividend yield ............................... None None None
Expected volatility ............................ 0.44 0.52 0.52
Risk-free interest rate .......................... 4.44% 4.63% 3.94%
Expected lives ............................... 3.4years 3.7 years 4.5 years
Estimated annual forfeiture rate .................. 7.59% 7.74% —
Weighted average fair value at grant date ........... $ 15.84 $ 25.44 $ 13.03
Employee Stock Purchase Plan Shares
Dividend yield ............................... None None None
Expected volatility ............................ 0.43 0.52 0.47
Risk-free interest rate .......................... 5.08% 4.96% 2.69%
Expected lives ............................... 1⁄2year 1⁄2year 1⁄2year
Weighted average fair value at exercise date ......... $ 12.75 $ 16.73 $ 7.60
F-24
Notes to Consolidated Financial Statements — (Continued)