Fully diluted shares outstanding, that is, the number of Target's "basic" shares outstanding (i.e., pre- transaction shares outstanding) plus the number of shares represented by the firm's "in the money" options, warrants, and convertible debt and preferred securities should be used in the calculation of the total cost of a takeover.

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Fully diluted shares outstanding reflects the total number of shares that would be outstanding if all convertible securities were exercised or converted. This provides a more accurate assessment of the total cost of a takeover as it includes all potential dilution from outstanding securities such as options and warrants.

Fully Diluted Shares Outstanding, That Is, the Number of Target's