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Methodology

Equity Compensation Value Calculator methodology

Annualise a user-entered equity estimate while keeping uncertainty explicit.
Duc Nguyen X.By Duc Nguyen X.· Founder, Wage101Last reviewed: View update historyMethodology

Educational only: Work and pay decision support, not tax, legal, financial or career advice.

Privacy: Calculations run locally; Wage101 does not receive your work or pay inputs.

Update policy: Reviewed when formulas or official dependencies change.

Scope: Market-neutral work and pay planning using your own assumptions.

1. Formulas and units

Annual expected value
annualizedExpectedValue = estimatedGrantValue × expectedVestedRate × realizabilityRate ÷ vestingYears

Where

estimatedGrantValue
Estimated grant value (currency units)Source: User assumption
vestingYears
Vesting years (years)Source: Work record
expectedVestedRate
Expected vested share (decimal rate)Source: User assumption
realizabilityRate
Realizability share (decimal rate)Source: User assumption
annualizedExpectedValue
Annualised expected value (currency units/year)Source: Calculated output
Annualised face value
annualizedFaceValue = estimatedGrantValue ÷ vestingYears

Where

estimatedGrantValue
Estimated grant value (currency units)Source: User assumption
vestingYears
Vesting years (years)Source: Work record
annualizedFaceValue
Annualised face value (currency units/year)Source: Calculated output
Annualised risk discount
annualizedRiskDiscount = annualizedFaceValue − annualizedExpectedValue

Where

annualizedRiskDiscount
Annualised risk discount (currency units/year)Source: Calculated output
Value after cash foregone
annualizedValueAfterCashForegone = annualizedExpectedValue − annualCashForegone

Where

annualCashForegone
Annual cash foregone (currency units/year)Source: User assumption
annualizedValueAfterCashForegone
Value after cash foregone (currency units/year)Source: Calculated output

Money inputs and outputs use the currency selected in the scenario without changing the canonical methodology. Pay, time, benefits and work-related costs use the units stated beside each input.

2. Worked example

Input assumptions

A 120,000 estimated grant over four years with 75% expected vesting and 80% realizability.

Calculation and outputs

Example

A 120,000 estimated grant over four years with 75% expected vesting and 80% realizability.

Annualised expected value
18,000.00 currency units
Annualised face value
30,000.00 currency units
Annualised risk discount
12,000.00 currency units
Value after cash foregone
3,000.00 currency units

Face value, risk discount and cash trade-off remain separate.

Interpretation

Use expected annual value while keeping face value and the risk discount visible.

3. Validation and boundary checks

  • Expected value never exceeds face value.
  • Vesting and realizability shares stay between zero and one.
  • Non-positive grant value or vesting years return an input error.

4. Assumptions and source classification

  • Grant value is supplied by the user.
  • Vesting and realizability are scenario probabilities.
  • No tax or dilution is modelled.

This calculator has no current policy-data dependency. Its work and pay assumptions are user supplied. Registered family-level regression suites exercise the shared work-logic engine and worked-result reconciliation.

5. Limitations

  • Private equity may have no liquid market.
  • Future prices and employment duration are uncertain.
  • This is not a valuation or tax calculation.

This is educational decision support, not personalised tax, legal, financial or career advice. Check the treatment of your circumstances under the rules that apply to you and seek qualified advice where appropriate.

6. Update and evidence policy

Registered family-level suites test formula invariants and example reconciliation; the release ledger records that coverage without claiming a separate oracle for every line of public copy. There is no official threshold or benchmark to refresh for this calculator. Work and pay inputs remain user-supplied because they vary by person, job and contract.

Change history

  1. : Initial public release of the Equity Compensation Value planner and methodology.

Related reading

Use these practical guides to interpret the decision and its assumptions.

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