medium · Investment Banking
A company has $300 million of convertible preferred stock with a 5.00 dividend per share and a conversion price of $20.00.
If the current stock price is $25.00, what is the adjustment to the Diluted EPS numerator?
- Subtract the dividends to account for the increased number of shares.
- Add back the after-tax interest expense associated with the preferred stock.
- No adjustment is needed to the numerator because preferred stock is part of equity.
- Add back the preferred dividends that were previously subtracted to reach Net Income attributable to common.
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