If the warrants are exercised, the company will receive 2,000 x $20 = $40,000 and
issue 2,000 new shares. The treasury stock method assumes the company uses these
funds to repurchase shares at the average market price of $30. The company would
repurchase $40,000 / $30 = 1,333 shares. Net shares issued would be 2,000 - 1,333 =
667 shares.