Apple 2008 Annual Report Download - page 82

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Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 7—Stock-Based Compensation
SFAS No. 123R requires the use of a valuation model to calculate the fair value of stock-based awards. The Company uses the BSM option-
pricing model to calculate the fair value of stock-based awards. The BSM option-pricing model incorporates various assumptions including
expected volatility, expected life, and interest rates. The expected volatility is based on the historical volatility of the Company’s common stock
over the most recent period commensurate with the estimated expected life of the Company’s stock options and other relevant factors including
implied volatility in market traded options on the Company’s common stock. The Company bases its expected life assumption on its historical
experience and on the terms and conditions of the stock awards it grants to employees. Stock-based compensation cost is estimated at the grant
date based on the award’s fair-value as calculated by the BSM option-pricing model and is recognized as expense ratably on a straight-line basis
over the requisite service period.
The compensation expense incurred by the Company for RSUs is based on the closing market price of the Company’
s common stock on the date
of grant and is amortized ratably on a straight-line basis over the requisite service period.
The weighted-average assumptions used for the three fiscal years ended September 27, 2008, and the resulting estimates of weighted-average
fair value per share of options granted and of employee stock purchase plan rights during those periods are as follows:
Note 8—Commitments and Contingencies
Lease Commitments
The Company leases various equipment and facilities, including retail space, under noncancelable operating lease arrangements. The Company
does not currently utilize any other off-balance sheet financing arrangements. The major facility leases are generally for terms of 3 to 20 years
and generally provide renewal options for terms of 1 to 5 additional years. Leases for retail space are for terms of 5 to 20 years, the majority of
which are for 10 years, and often contain multi-year renewal options. As of September 27, 2008, the Company’s total future minimum lease
payments under noncancelable operating leases were $1.8 billion, of which $1.4 billion related to leases for retail space.
79
2008
2007
2006
Expected life of stock options
3.41 years
3.46 years
3.56 years
Expected life of stock purchase rights
6 months
6 months
6 months
Interest rate
—
stock options
3.40%
4.61%
4.60%
Interest rate
—
stock purchase rights
3.48%
5.13%
4.29%
Volatility
—
stock options
45.64%
38.13%
40.34%
Volatility
—
stock purchase rights
38.51%
39.22%
39.56%
Dividend yields
—
—
—
Weighted
-
average fair value of stock options granted during the year
$
62.73
$
31.86
$
23.16
Weighted
-
average fair value of employee stock purchase plan rights during the year
$
42.27
$
20.90
$
14.06