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Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Share
-Based Compensation
Share-based compensation recognized in 2009 was $889 million ($851 million in 2008 and $952 million in 2007).
We adjust share-based compensation on a quarterly basis for changes to our estimate of expected equity award forfeitures
based on our review of recent forfeiture activity and expected future employee turnover. We recognize the effect of adjusting
the forfeiture rate for all expense amortization after January 1, 2006 in the period that we change the forfeiture estimate. The
effect of forfeiture adjustments in 2007, 2008, and 2009 was not significant.
The total share-based compensation cost capitalized as part of inventory as of December 26, 2009 was $33 million ($46
million as of December 27, 2008 and $41 million as of December 29, 2007). During 2009, the tax benefit that we realized for
the tax deduction from option exercises and other awards totaled $119 million ($147 million in 2008 and $265 million in
2007).
We estimate the fair value of restricted stock unit awards with time-based vesting using the value of our common stock on the
date of grant, reduced by the present value of dividends expected to be paid on our common stock prior to vesting. We
estimate the fair value of market-based restricted stock units using a Monte Carlo simulation model on the date of grant. We
based the weighted average estimated values of restricted stock unit grants, as well as the weighted average assumptions that
we used in calculating the fair value, on estimates at the date of grant, as follows:
We use the Black-Scholes option pricing model to estimate the fair value of options granted under our equity incentive plans
and rights to acquire common stock granted under our stock purchase plan. We based the weighted average estimated values
of employee stock option grants (excluding stock option grants in connection with the Option Exchange) and rights granted
under the stock purchase plan, as well as the weighted average assumptions used in calculating these values, on estimates at
the date of grant, as follows:
We base the expected volatility on implied volatility, because we have determined that implied volatility is more reflective of
market conditions and a better indicator of expected volatility than historical volatility. We use the simplified method of
calculating expected life, due to significant differences in the vesting terms and contractual life of current option grants
compared to our historical grants.
94
2009
2008
2007
Estimated values
$
14.63
$
19.94
$
21.13
Risk
-
free interest rate
0.9
%
2.1
%
4.7
%
Dividend yield
3.5
%
2.6
%
2.0
%
Volatility
46
%
n/a
n/a
Stock Options
Stock Purchase Plan
2009
2008
2007
2009
2008
2007
Estimated values
$
4.72
$
5.74
$
5.79
$
4.14
$
5.32
$
5.18
Expected life (in years)
4.9
5.0
5.0
.5
.5
.5
Risk
-
free interest rate
1.8
%
3.0
%
4.5
%
0.4
%
2.1
%
5.2
%
Volatility
%
37
%
%
44
%
35
%
28
%
Dividend yield
3.6
%
2.7
%
2.0
%
3.6
%
2.5
%
2.0
%