hard · Investment Banking rx-dcm-ecm
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 preferred dividends paid from Net Income to fund the increased common share count.
- Add back the after-tax portion of the coupon interest expense associated with the convertible preferred stock.
- No adjustment to the numerator is needed, since preferred stock is classified entirely within shareholders' equity.
- Add back the preferred dividends that were previously subtracted to reach Net Income attributable to common.
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