FORM 10-K

57 Stock Options Options to purchase our shares have a maximum term of ten years and generally vest ratably over a three-year period. The stock option compensation cost calculated under the fair value approach is recognized over the vesting period of the stock options. We estimate the fair value of options granted on the date of grant using the Black-Scholes option-pricing model. Expected volatilities are based on implied volatilities from traded options on our common stock, historical volatilities and other factors. The expected term is based on historical option exercise data, which is adjusted to reflect any anticipated changes in expected behavior. The weighted-average fair value of options granted during the past three years and the assumptions used in our option-pricing model for such grants are as follows: 2017 2016 2015 Fair value of options at grant date $ 13.80 $ 10.33 $ 14.03 Dividend yield 0.2% 0.2% 0.2% Expected volatility 29.2% 33.6% 34.9% Risk-free interest rate 1.9% 1.2% 1.5% Expected term (in years) 4.7 4.8 4.8 The stock option activity during 2017 is provided below: (Options in thousands) Number of Options Weighted- Average Exercise Price Outstanding at beginning of year 9,264 $ 33.61 Granted 1,840 50.34 Exercised (1,626) (31.99) Forfeited or expired (240) (41.92) Outstanding at end of year 9,238 $ 37.02 Exercisable at end of year 5,865 $ 32.79 At December 30, 2017, our outstanding options had an aggregate intrinsic value of $181 million and a weighted-average remaining contractual life of six years. Our exercisable options had an aggregate intrinsic value of $140 million and a weighted-average remaining contractual life of five years at December 30, 2017. The total intrinsic value of options exercised during 2017, 2016 and 2015 was $29 million, $15 million and $23 million, respectively. Restricted Stock Units We issue restricted stock units settled in both cash and stock (vesting one-third each in the third, fourth and fifth year following the year of the grant), which include the right to receive dividend equivalents. The fair value of these units is based on the trading price of our common stock and is recognized ratably over the vesting period. For units payable in stock, we use the trading price on the grant date, while units payable in cash are remeasured using the price at each reporting period date. The 2017 activity for restricted stock units is provided below: Units Payable in Stock Units Payable in Cash (Shares/Units in thousands) Number of Shares Weighted- Average Grant Date Fair Value Number of Units Weighted- Average Grant Date Fair Value Outstanding at beginning of year, nonvested 797 $ 35.94 1,444 $ 36.33 Granted 154 49.57 310 49.65 Vested (252) (32.07) (378) (31.57) Forfeited (31) (35.42) (113) (39.33) Outstanding at end of year, nonvested 668 $ 40.55 1,263 $ 40.75 The fair value of the restricted stock unit awards that vested and/or amounts paid under these awards is as follows: (In millions) 2017 2016 2015 Fair value of awards vested $ 27 $ 20 $ 25 Cash paid 19 12 20