Coca Cola 2008 Annual Report Download - page 113

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THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15: STOCK COMPENSATION PLANS (Continued)
Stock options granted in December 2003 and thereafter generally become exercisable over four years (with
approximately 25 percent of the total grant vesting each year on the anniversary of the grant date) and expire
10 years from the date of grant. Stock options granted from 1999 through July 2003 generally became exercisable
over four years and expire 15 years from the date of grant. Prior to 1999, stock options generally became
exercisable over a three-year vesting period and expire 10 years from the date of grant. The 1999 Stock Option
Plan and the 2002 Stock Option Plan have been amended to provide a maximum option term of 10 years for all
grants in 2008 and beyond. The 2008 Option Plan provides a maximum option term of 10 years.
The fair value of each option award is estimated on the grant date using a Black-Scholes-Merton option-
pricing model that uses the assumptions noted in the following table. The expected term of the options
represents the period of time that options granted are expected to be outstanding and is derived by analyzing
historic exercise behavior. Expected volatilities are based on implied volatilities from traded options on the
Company’s stock, historical volatility of the Company’s stock, and other factors. The risk-free interest rate for
the period matching the expected term of the option is based on the U.S. Treasury yield curve in effect at the
time of the grant. The dividend yield is the calculated yield on the Company’s stock at the time of the grant.
The shares of common stock to be issued, transferred and/or sold under the stock option plans are made
available from authorized and unissued Company common stock or from the Company’s treasury shares. In
2007, the Company began issuing common stock under these plans from the Company’s treasury shares.
The following table sets forth information about the weighted-average fair value of options granted during
the past three years and the weighted-average assumptions used for such grants:
2008 2007 2006
Fair value of options at grant date $ 9.81 $ 8.46 $ 8.16
Dividend yields 2.27% 2.6% 2.7%
Expected volatility 18.02% 15.4% 19.3%
Risk-free interest rates 3.18% 4.6% 4.5%
Expected term of the option 6 years 6 years 6 years
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