A company has $100m face value of in-the-money convertible bonds (conversion price $20, current share price $30). How should you treat the convertible in the enterprise-value bridge? Walk through the calculation.

Because the convertible is in-the-money, you treat it as equity, not debt, using the if-converted method (this is the more conservative/standard approach when it's clearly in-the-money). The conversion ratio is $100m ÷ $20 = 5.0m new shares. So: remove the $100m convertible from debt in the net-debt portion of the bridge, and instead add the 5.0m shares to the diluted share count. Those 5.0m shares at the $30 price represent $150m of equity value. The net effect versus leaving it as $100m of debt is that enterprise value reflects the higher of the two treatments and you avoid double-counting (you don't count it as both $100m of debt and 5m dilutive shares). If instead the convertible were out-of-the-money, you'd leave it as straight debt at face value with no dilution. Always state the convention: in-the-money → if-converted (equity, add shares, drop the debt); out-of-the-money → debt at face.