Impact of Share-Based Compensation on Earnings

ABC Corporation, a publicly listed company, has recently adopted a new share-based compensation plan for its executives. Under this plan, executives are awarded stock options that vest over a four-year period and can be exercised at any time after the vesting period. The options are accounted for using the Black-Scholes model, and ABC Corporation recognizes the expense associated with the stock options on a straight-line basis over the vesting period.

At the end of Year 1, the stock options were valued at $5 per share. In Year 2, the market price of the underlying stock increased to $10 per share, and at the end of Year 3, it further increased to $15 per share.

As of the end of Year 3, the total compensation expense recognized for the stock options is reported as $100,000 in ABC Corporation’s financial statements. What is the impact of the share-based compensation on ABC Corporation’s earnings if all options are exercised by the executives immediately after the vesting period?