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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (64036)	5/14/2003 10:30:01 PM
From: BWAC	Respond to of 77400

Stock outstanding is the same. Company has 400 Million more cash. What is this expense "opportunity" cost based on? Want to tackle the option component of convertible bonds and the same "opportunity" costs?

To: RetiredNow who wrote (64036)	5/14/2003 10:44:14 PM
From: BWAC	Respond to of 77400

"Opportunity" costs. Options act as incentives for trained employees to stay. If I accept your "opportunity" cost reasoning, then I have to think that all aspects of that phantom transaction should be considered. Employee turnover might be reduced. Turnover is expensive. Training is expensive. Some say the whole first year is really unproductive for new hires. The new hire doesn't become fully trained and efficient at the job until year 2 creating a lot of overhead and potential costs for the employer. So? If options reduce turnover then does the company have an "opportunity" gain? It must? The opportunity expense of options created the opportunity for the company to avoid costly training of new hires. Black Scholes that too by the way. You're assuming the company gets nothing of tangible value in return for the future guesstimate value of the option multiplied by volatility.