Running
TeXShop with
pdflatex for typesetting on a file containing
however returns the error
\begin{figure}[!htb]
\centering
\includegraphics[scale=.7]{nfa.eps}
\caption{Digraph.}
\label{fig:digraph}
\end{figure}
however returns the error
! LaTeX Error: Unknown graphics extension: .eps.
This can be resolved by adding
\usepackage{epstopdf}
which allows to convert eps images to pdf for use with pdflatex. This works perfect.