IDTI - an IC Play on Growth Markets Message Board

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Technology Stocks : IDTI - an IC Play on Growth Markets

IDTI 48.99

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Mar 29 5:00 PM EST

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To: Bharat Khatiwala who wrote (2109)	3/16/1997 10:35:00 PM
From: patrick ertel	of 11555

May I respectfully say that you are way off base here. Why do you think corporations use debt to leverage their equity? It is the same principle. If you don't think so , sit down and calculate the after tax return using a margin loan against borrowing money at say prime plus 3% which would essentially be an unsecured bank loan-without a tax benefit( Actually, I'm comparing apples and oranges, but these are your two realistic options. The tax code may still permit tax deductability for the bank loan , so long as it is for investment purposes). And for good measure, look up the concept of weighted average cost of capital in your finance dictionary. The prevailing issue here has to do with the probability that the expected return on your investment will be greater than the after tax cost of using the debt.

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