I am having trouble in figuring out antidilutive EPS when both options (in-the-money, average market price is more than exercise price) and convertible preferred stocks are present. I have found somewhere that it only calculates the effect of PS after convesrion (pref. dividend/number of common stocks from PS conversion) and then compute EPS if only options are exercised and hence convestion effect of PS (say 1.50) is more that EPS with only options (say 1.05) then Preferred considered anti-dilutive and Diluted EPS is the one with ONLY options conversion. I am kind of confsued here. The main thing I know if the diluted EPS is more that Basic it is antidilutive. In the same example if I calculate diluted after both PS and options conversion I get EPS less than Basic EPS, therefore, the PS conversion should NOT be ANTI-Dilutive. However, the material syas it is!
Would you please explain this situation when the question will have both convertible PS and options, how to determine the diluted EPS?