> ## Documentation Index
> Fetch the complete documentation index at: https://valuation-101.com/docs/llms.txt
> Use this file to discover all available pages before exploring further.

# Employee Options

> Compute the value of outstanding employee stock options using dilution-adjusted Black-Scholes.

## What it does

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.

## Why it matters

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.