German - ADM

Archer Daniels Midland CompanyNotes to Consolidated Financial Statements (Continued)Note 8.Shareholder’s Equity (Continued)The fair value of each option grant is estimated as of the date of grant using the Black-Scholes single optionpricing model. The volatility assumption used in the Black-Scholes single option pricing model is based on thehistorical volatility of the Company’s stock. The volatility of the Company’s stock was calculated based uponthe monthly closing price of the Company’s stock for the eight year period immediately prior to the date ofgrant. The average expected life represents the period of time that option grants are expected to be outstanding.The risk-free rate is based on the rate of U.S. Treasury zero-coupon issues with a remaining term equal to theexpected life of option grants. The assumptions used in the Black-Scholes single option pricing model are asfollows.2007 2006 2005Dividend yield 1% 2% 2%Risk-free interest rate 5% 4% 4%Stock volatility 30% 31% 27%Average expected life (years) 8 8 9A summary of option activity during 2007 is presented below:Weighted-AverageSharesExercise Price(In thousands, except per share amounts)Shares under option at June 30, 2006 9,936 $15.94Granted 1,271 41.79Exercised (1,700) 13.75Forfeited or expired (125) 19.07Shares under option at June 30, 2007 9,382 $19.80Exercisable at June 30, 2007 2,234 $14.24The weighted-average remaining contractual term of options outstanding and exercisable at June 30, 2007, is 7years and 5 years, respectively. The aggregate intrinsic value of options outstanding and exercisable atJune 30, 2007, is $125 million and $42 million, respectively. The weighted-average grant-date fair values ofoptions granted during 2007, 2006, and 2005, were $16.42, $7.52, and $5.41 respectively. The total intrinsicvalues of options exercised during 2007, 2006, and 2005, were $41 million, $60 million, and $33 million,respectively. Cash proceeds received from options exercised during 2007, 2006, and 2005, were $20 million,$30 million, and $31 million, respectively.At June 30, 2007, there was $34 million of total unrecognized compensation expense related to option grants.Amounts to be recognized as compensation expense during the next five fiscal years are $12 million, $10million, $7 million, $4 million, and $1 million, respectively.56