Consolidated Financial Statements Notes 31. Stock options 
31. STOCK OPTIONS
COMPENSATION COST IN CONNECTION WITH THE STOCK OPTION PLANS
OF THE FRESENIUS GROUP
The Fresenius Group recognized compensation cost in an amount of € 28 million for stock options granted since 1998. For stock incentive plans which are performance based, the Fresenius Group recognizes compensation cost over the vesting periods, based on the then current market values of the underlying stock.
FAIR VALUE OF STOCK OPTIONS
The Fresenius Group elected to adopt FAS 123(R) prospectively.
Fresenius Group’s determination of the fair value of grants is based on the Black-Scholes option pricing model. The Black-Scholes option pricing model was developed for estimating the fair values of options that have no vesting restrictions. Option valuation models require the input of highly subjective assumptions including expected stock price volatility. Fresenius Group’s assumptions are based upon its past experiences, market trends and the experiences of other entities of the same size and in similar industries. Fresenius Group’s stock options have characteristics that vary significantly from traded options and changes in subjective assumptions can materially affect the fair value of the option.
The weighted-average assumptions for the calculation of the fair value of grants made during the years 2007 and 2006 are as follows:
| 2007 | 2006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expected dividend yield | 0.94% | 1.50% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk-free interest rate | 4.48% | 3.80% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expected volatility | 29.06% | 35.50% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expected life of options | 5.3 years | 5.3 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise price per option in € | 56.74 | 40.451) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1) Before the share split became effective on January 24, 2007, the exercise price per option was € 121.36. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The expected volatility results from the historical volatility calculated over the expected life of options. The volatility was determined when the fair value of stock options was calculated for the first time and since then has been controlled every year upon issuance of a new tranche.
