medium · Investment Banking implied-share-price
A company has a 1,000,000 convertible bond with a conversion price of $20. The current share price is $25.
In the Enterprise Value bridge, how is this handled?
- Include $1,000,000 in total debt and ignore the shares since they haven't been issued yet.
- Treat the entire $1,000,000 as a cash equivalent since it is in-the-money.
- Add 50,000 shares to the diluted share count and exclude $1,000,000 from total debt.
- Include $1,000,000 in total debt and add 50,000 shares to the share count.
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