An analyst is building a DCF for Anderson Plastics, a publicly$-$traded plastics manufacturer, with $120$ million shares of common stock currently outstanding and trading at $$85$ per share. Using the unlevered approach, the analyst calculates enterprise value of $$3$ billion and net debt of $$800$ million $($$$1$ billion in gross debt, less $$200$ million in cash$).$ After checking her work, she realizes that she did not reflect the following information in her calculations:

There is a $$100$ million convertible preferred stock on the balance sheet.

There are $200,000$ preferred shares outstanding, with a liquidation value of $$500$ per share, and each convertible into $4$ shares of common stock at the option of the holder.

The preferred shareholders receive no preferred dividends.

Which of the following is the most appropriate adjustment needed to reflect the preferred stock details above?

To answer the question, treat out$-$of$-$the$-$money convertible preferred stock as a debt$-$equivalent claim with no equity

component and in$-$the$-$money convertible preferred stock as straight equity with no debt component.