Visa 2015 Annual Report Download - page 126

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VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2015
During fiscal 2015, 2014 and 2013, the fair value of each stock option was estimated on the date
of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:
2015 2014 2013
Expected term (in years)(1) ........................... 4.55 4.80 6.08
Risk-free rate of return(2) ............................ 1.5% 1.3% 0.8%
Expected volatility(3) ................................ 22.0% 25.2% 29.3%
Expected dividend yield(4) ........................... 0.8% 0.8% 0.9%
Fair value per option granted ......................... $ 12.04 $ 11.03 $ 9.76
(1) Beginning in fiscal 2014, assumption is based on the Company’s historical option exercises and
those of a set of peer companies that management believes is generally comparable to Visa. The
Company’s data is weighted based on the number of years between the measurement date and
Visa’s initial public offering as a percentage of the options’ contractual term. The relative weighting
placed on Visa’s data and peer data in fiscal 2015 was approximately 67% and 33%, respectively,
and the relative weighting in fiscal 2014 was 58% and 42%, respectively. In fiscal 2013, assumption
was fully based on peer companies’ data.
(2) Based upon the zero coupon U.S. treasury bond rate over the expected term of the awards.
(3) Based on the Company’s implied and historical volatility. The expected volatilities ranged from 21%
to 23% in fiscal 2015. In fiscal 2013, historical volatility was a blend of Visa’s historical volatility and
those of comparable peer companies. The relative weighting between Visa historical volatility and
the historical volatility of the peer companies was based on the percentage of years Visa stock price
information is available since its initial public offering compared to the expected term.
(4) Based on the Company’s annual dividend rate on the date of grant.
The following table summarizes the Company’s option activity for fiscal 2015:
Options
Weighted-
Average
Exercise Price
Per Share
Weighted-
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value (1)
(in millions)
Outstanding at October 1, 2014 ......... 11,649,704 $ 22.52
Granted ............................. 1,444,376 $ 62.87
Forfeited ............................ (379,662) $ 50.53
Exercised ........................... (3,036,701) $ 20.53
Outstanding at September 30, 2015 ..... 9,677,717 $ 28.07 5.0 $402
Options exercisable at September 30,
2015 ............................... 7,083,305 $ 18.26 3.7 $364
Options exercisable and expected to vest
at September 30, 2015(2) ............... 9,392,332 $ 27.26 4.9 $398
(1) Calculated using the closing stock price on the last trading day of fiscal 2015 of $69.66, less the
option exercise price, multiplied by the number of instruments.
(2) Applies a forfeiture rate to unvested options outstanding at September 30, 2015 to estimate the
options expected to vest in the future.
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