Yahoo 2007 Annual Report Download - page 99

The weighted average grant date fair value of options granted in the years ended December 31, 2005, 2006, and
2007 was $11.60, $10.03, and $8.50 per share, respectively. The weighted average fair value of options assumed in
connection with acquisitions in the year ended December 31, 2007 was $26.66 per share.
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the aggregate difference
between the closing stock price of the Company’s common stock on December 31, 2007 and the exercise price for
in-the-money options) that would have been received by the option holders if all in-the-money options had been
exercised on December 31, 2007.
The total intrinsic value of options exercised in the years ended December 31, 2005, 2006, and 2007 were
$1,171 million, $393 million, and $393 million, respectively.
As of December 31, 2007, there was $467 million of unamortized stock-based compensation expense related to
unvested stock options which is expected to be recognized over a weighted average period of 3.06 years.
Cash received from option exercises and purchases of shares under the Purchase Plan for the year ended
December 31, 2007 was $375 million.
The total tax benefit attributable to stock options exercised in the year ended December 31, 2007 was $146 million.
The tax benefits from stock-based awards for the years ended December 31, 2005, 2006, and 2007 were
$760 million, $626 million, and $76 million, respectively, which are reported on the consolidated statements
of cash flows. This represents the total amount of income tax benefit in the current period related to options
exercised in current and prior periods.
In 2007, $35 million of excess tax benefits from stock-based awards were included as a source of cash flows from
financing activities. In 2006, excess tax benefits from stock-based awards of $597 million were included as a source
of cash flows from financing activities. See Note 10 — “Income Taxes” for the 2007 correction of this amount.
The fair value of option grants is determined using the Black-Scholes option pricing model with the following
weighted average assumptions:
2005 2006 2007 2005 2006 2007
Years Ended
December 31,
Years Ended
December 31,
Stock Options Purchase Plans
(5)
Expected dividend yield
(1)
..................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Risk-free interest rate
(2)
....................... 3.8% 4.8% 4.4% 2.9% 4.8% 4.4%
Expected volatility
(3)
......................... 39% 34% 34% 34% 33% 32%
Expected life (in years)
(4)
...................... 3.75 3.75 3.64 0.88 1.25 1.11
(1)
The Company currently has no history or expectation of paying cash dividends on its common stock.
(2)
The risk-free interest rate is based on the United States Treasury yield for a term consistent with the expected life of the awards in effect
at the time of grant.
(3)
The Company estimates the volatility of its common stock at the date of grant based on the implied volatility of publicly traded options
on its common stock, with a term of one year or greater. Up to September 30, 2005, the Company used an equally weighted average of
trailing volatility and market based implied volatility for the computation.
(4)
The expected life of stock options granted under the Plans is based on historical exercise patterns, which the Company believes are
representative of future behavior. The expected life of options granted under the Purchase Plan represents the amount of time
remaining in the 24-month offering period.
(5)
Assumptions for the Purchase Plan relate to the annual average of the enrollment periods. Enrollment is currently permitted in May
and November of each year.
97
Yahoo! Inc.
Notes to Consolidated Financial Statements — (Continued)