On January 1, Year 1, Gallagher Corporation Issued 700,000 Stock

On January 1, Year 1, Gallagher Corporation issued 700,000 stock options for 700,000 shares to a division manager. The options have an estimated fair value of $10 each. These options are not exercisable unless division revenue increases by 8% in four years. Gallagher estimates that it is probable that the goal will be achieved. What is pretax compensation expense for year 1?

A) $0
B) $1,750,000
C) $2,333,333
D) $7,000,000