No.169 (Diluted EPS) on Volume 2 Schweser Volume 2 company, average, reported, addition, net

Spongebob

Company reported net income of $500 million and the company had 100 million common shares outstanding. In addition, it had 5 million shares of convertible preferred and 10 million outstanding warrants during the year. Each preferred share pays a dividend of $4 per share and is convertible into three common shares. Each warrant is convertible into one common share at $25 per share. The company's stock traded at an average $50 per share and the company did not declare any dividends for the year. What is diluted EPS.

a. $4
b. $4.2
c. $4.8

I thought it was b as"

500,000,000 / (100,000,000+15,000,000+5,000,000)= $4.2, but the answer is A. It subtracted $20 million from net income, which is preferred dividend. I thought I had to add back the preferred dividends as they're converted into equity.

Help please.
Thanks