medium · CFA Level I fsa
Helion Rail issues a convertible bond. When calculating diluted EPS using the if-converted method, the analyst must:
- Subtract the preferred dividends from the numerator and use the treasury stock method for the denominator.
- Add the total interest expense to the numerator without adjusting for taxes.
- Add back the after-tax interest expense to the numerator and increase the denominator by the new shares.
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