Determines whether the company has outstanding employee stock options and, if so, computes their total value using dilution-adjusted Black-Scholes. The resulting value is subtracted from equity in the DCF equity bridge, reducing the estimated value per share.
Employee stock options represent a claim on equity that existing shareholders must share. Ignoring them overstates the value per share. The dilution-adjusted Black-Scholes model accounts for this by valuing the options and deducting them before dividing by shares outstanding.
