medium · Investment Banking implied-share-price
A company has a $300 million convertible bond with a conversion price of $30.00. The current share price is $40.00.
When calculating Enterprise Value using the if-converted method, how is this bond treated?
- The $300 million remains classified in Total Debt on the balance sheet, and no additional shares are added to the count.
- The bond is ignored entirely in the EV build because conversion hasn't formally occurred yet.
- Both the $300 million debt and the 10 million converted shares are included at the same time.
- The $300 million is excluded from Total Debt, and 10 million shares are added to the diluted share count.
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