Final answer:
The incremental effect of convertible bonds is determined by the interest saved divided by the number of common shares from the conversion.
Step-by-step explanation:
The incremental effect of convertible bonds is the interest saved divided by the number of common shares from the conversion. This can be calculated by taking the difference in interest costs between the convertible bond and a non-convertible bond, and dividing it by the number of common shares obtained through conversion.