Question - At January 1, Year 1, Edwards Company issued 10,000 stock options permitting employees to buy 10,000 shares of stock for $50 per share. The vesting schedule (graded-vesting) and value of the options that vest over the 3-year period is estimated at January 1, Year 1, as set forth in the following table.

Vesting Date Amount Vesting Fair Value per Option

Dec. 31, Year 1 10% $2

Dec. 31, Year 2 30% $3

Dec. 31, Year 3 60% $4

What is the compensation cost for Year 1 relating to these stock options? (Do not use the straight-line method.)