Series 79 practice questionmediumEnterprise Value vs Equity Value
If a company has in-the-money options outstanding, which method adjusts the share count to reflect potential dilution for equity value calculations?
- AIf-converted method
- BBasic share count method
- COutstanding warrants method
- DTreasury stock method✓ Correct answer
Explanation
Why D — Treasury stock method
The treasury stock method adjusts the basic share count for in-the-money options and warrants, reflecting potential dilution. Using just the basic count or ignoring warrants would understate diluted equity value.
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