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Table of Contents
VMWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The fair value of each VMware option granted at $25.00 was estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted average assumptions:
The fair value of each VMware option granted at $29.00 was estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted average assumptions:
For all equity awards granted in 2007, volatility was based on an analysis of historical and implied volatility of publicly-traded companies
with similar characteristics, including industry, stage of life cycle, size and financial leverage. The expected term was calculated based on the
historical experience that VMware employees have had with EMC stock options grants as well as the expected term of similar grants of
comparable companies. The risk-
free interest rate was based on a treasury instrument whose term is consistent with the expected life of the stock
options.
Fair Value of EMC Options
There were no EMC stock option grants to VMware employees subsequent to the first quarter of 2007. VMware employees eligible to
participate in the VMware Employee Stock Purchase Plan were able to participate in the EMC employee stock purchase plan up through the date
of the IPO, at which time they were withdrawn from the plan. The fair value of each EMC option granted during the years ending December 31,
2007, 2006 and 2005 is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average
assumptions:
86
Dividend yield
None
Expected volatility
38.2
%
Risk
-
free interest rate
4.8
%
Expected life (in years)
3.4
Dividend yield
None
Expected volatility
39.6
%
Risk
-
free interest rate
4.5
%
Expected life (in years)
3.4
For the Year Ended December 31,
EMC Stock Options
2007
2006
2005
Dividend yield
None
None
None
Expected volatility
30.1
%
34.4
%
40.8
%
Risk
-
free interest rate
4.7
%
4.8
%
4.0
%
Expected life (in years)
4.2
4.0
4.0
Weighted
-
average fair value at grant date
$
4.45
$
4.28
$
5.22
For the Year Ended December 31,
EMC Employee Stock Purchase Plan
2007
2006
2005
Dividend yield
None
None
None
Expected volatility
25.3
%
27.6
%
42.1
%
Risk
-
free interest rate
5.0
%
4.9
%
3.0
%
Expected life (in years)
0.5
0.5
0.5
Weighted
-
average fair value at grant date
$
3.07
$
2.86
$
3.95