Management of a mid-sized company needs large sums of cash to finance the construction of a new manufacturing plant. Management is considering issuing debt to obtain the cash but is unsure whether to issue convertible debt or debt issued with stock warrants due to the dilutive effects of each:

• Compare the potential dilutive effects of convertible debt versus debt issued with stock warrants.
• Include the potential effect each would have on earnings per share.
• Provide specific examples in your rationale.