Schmidt Electronics offered an incentive stock plan to its employees. On January 1, Year 1, options were granted for 80,000 $1 par common shares. The exercise price equals the $6 market price of the common stock on the grant date. The options cannot be exercised before January 1, Year 4, and expire on December 31, Year 5. Each option has a value of $3 based upon an option pricing model.

What is the total compensation cost for this plan?

A) $80,000
B) $160,000
C) $240,000
D) $480,000

Answer: C