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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: hueyone who wrote (52195)	7/18/2002 7:47:02 PM
From: paul_philp	Read Replies (1) of 54805

Huey, This is the 'opportunity cost' of the options argument. I think Buffet is a strong proponent of this argument against not expensing options. You have missed 2 things that I can see. First, company A will pay less tax then company B during the year of your example. Assuming a 30% tax rate, this brings back $30,000 of the missing free cash flow. The second issue is that number of shares issued to raise $100,000 will be less than the number of options granted to reach the $100,000 worth of B-S dollars. Company B's approach is more dilutive and Company A. I know you wanted to leave per share data out of the picture put I am afraid you cannot. We would need more data to work out the true FCF/share numbers to get a real comparison. Paul

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