Separate cash from an option grant
See this course’s project requirements
An equity-offer file with grant terms, vesting, exercise-cost scenarios, dilution, deadline questions and a cash-based offer comparison.
Keep your working files in your own notebook or software. Save a private description, checklist, and work link in My Proof.
What to include
- An offer term sheet separating salary and contingent equity.
- A vesting calendar and departure scenario. An exercise-cost worksheet with three hypothetical price scenarios.
- A simple dilution calculation and denominator questions.
- A departure deadline map and tax-adviser question list.
- A complete equity-offer comparison with a conditional recommendation.
Review and revise
Use these criteria to check your work and choose what to improve.
- Calculations reconcile to the supplied records, with units and dates labeled.
- Assumptions and missing information are visible, including the changed scenario.
- The recommendation follows the evidence and explains an important limitation.
- The six lesson outputs form a usable handoff that another learner can check.
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The idea in everyday life
Fictional Cedar Apps offers $48000 annual salary plus 1200 options with a $3 exercise price. The options vest 25% after 12 months, then 25% at each later anniversary through year 4. Unvested options are forfeited on leaving; vested options expire 90 days after leaving or at their stated 10-year expiration, whichever comes first. No sale market is promised. These invented terms are not standard terms or legal advice.
An option is a right to buy under stated terms, not a cash payment or a share already owned.
Separate cash from an option grant — worked practice
An option is a right to buy under stated terms, not a cash payment or a share already owned.
Fictional Cedar Apps offers $48000 annual salary plus 1200 options with a $3 exercise price. The options vest 25% after 12 months, then 25% at each later anniversary through year 4. Unvested options are forfeited on leaving; vested options expire 90 days after leaving or at their stated 10-year expiration, whichever comes first. No sale market is promised. These invented terms are not standard terms or legal advice.
1. List cash
Divide $48000 salary by 12 before deductions.
You should see: Monthly gross salary is $4000.
Only salary enters the regular cash comparison.
2. Describe grant
Write 1200 rights to buy at $3, subject to vesting.
You should see: No shares have been purchased.
Grant, vesting and exercise are different events.
3. Identify unknowns
Mark sale price and sale timing UNKNOWN.
You should see: A private grant has no guaranteed cash value.
A quoted valuation is not a ready buyer.
4. Write summary
Put salary and contingent equity in separate rows.
You should see: The offer sheet does not add 1200 options to salary dollars.
Different units should not be summed.
What to finish
An offer term sheet separating salary and contingent equity.
Watch for this
Treating options as guaranteed spendable income.
How can I tell I understand it?
Explain your calculation or classification and reproduce the changed case without copying the worked result.
Quick knowledge check
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Go to the knowledge checkOptional course overview video
What are stock options, and how do they work?
From Carta. Watch here or open it on YouTube .
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Sources and further reading
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Source & access notes · checked 2026-09-12
Inspected distinction between employee options and employee stock ownership retirement plans.
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Reuse: Link to the original. Free reading does not imply permission to reproduce the page; lessons and fixtures here are original.
Source & access notes · checked 2026-09-12
Inspected compensatory securities exemption and resale restrictions. Fictional terms control all exercises.
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Reuse: Link to the original. Free reading does not imply permission to reproduce the page; lessons and fixtures here are original.
Source & access notes · checked 2026-09-12
Direct watch-page title, channel and description inspected; employee option topics match the written course. oEmbed independently confirms the title and channel.
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Reuse: Link to the original. Free reading does not imply permission to reproduce the page; lessons and fixtures here are original.
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