What was the risk-free interest rate used in 2023 for The Standardx?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
the Black-Scholes-Merton option-pricing model with the following weighted-average assumptions:
| 2024 | 2023 | 2022 | |
|---|---|---|---|
| Exercise price | $ 156.97 | $ 111.71 | $ 94.60 |
| Expected life in years | 6.24 | 6.24 | 6.24 |
| Risk-free interest rate | 4.31 % | 3.70 % | 2.40 % |
| Ex |
Source: Item 10 — OTHER ASSETS (FDD pages 132–156)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, the risk-free interest rate used in 2023 was 3.70%. This rate is a key assumption in the Black-Scholes-Merton option-pricing model, which The Standardx uses to estimate the fair value of stock appreciation rights (SARs). The risk-free interest rate is based on U.S. Treasury instruments with similar expected life.
The expected life in years for the SARs was 6.24 in 2023. The exercise price for the SARs was $111.71 in 2023. The expected volatility was 37.37% in 2023. There was no annual dividend yield in 2023.
For a prospective franchisee, understanding these rates and assumptions is crucial because they impact the valuation of certain assets and liabilities of The Standardx. While franchisees may not directly deal with these financial instruments, the overall financial health and stability of the franchisor, as reflected in these valuations, can affect the support and resources available to franchisees. It's important to note that these rates are specific to the valuation of SARs and may not reflect the actual interest rates a franchisee might encounter when securing financing for their own business operations.