标题: Diluted Earnings with Convertible Debt [打印本页] 作者: prashantsahni 时间: 2011-7-11 18:40 标题: Diluted Earnings with Convertible Debt
I haven't seen this question anywhere and can't find clarification in the CFAI stuff... but do you add interest expense or interest (coupon) payment to Net Income when calculating?作者: ramzes 时间: 2011-7-11 18:40
What's the difference between interest expense and an interest coupon payment?
Aren't they the same? As far as I know it's NI + (convertible debt interest)(1-t)作者: smartpants 时间: 2011-7-11 18:40
@jmhatlanta
From what I've seen they have been giving convertible debt at par. IMO, I don't think they would try and be this tricky on a question that is focusing on diluted EPS. I'd just be adding (interest payment)(1-t) back to NI. Make sure it is dilutive and decreases EPS because I could see them throwing that curve ball.
@lincfucious
Interest expense = BV at beginning of period * YTM
Interest expense differs from interest coupon when you have discount/premium bonds.
Interest coupon = Face value * coupon rate.作者: bluejazzy 时间: 2011-7-11 18:40
If you are talking about interest expense on the income statement, this may be misleading because you have interest on short term debt that isnt part of cost of capital. only interest in long term debt.作者: homie 时间: 2011-7-11 18:40
are preferred dividends removed from net income when calculating diluted EPS, or only for basic EPS?
thanks作者: koba 时间: 2011-7-11 18:40
The preferred dividends are added back to NI if they're conversion is dilutive. I got in the habit of always subtracting them and then, if necessary, I'll add them back in.
