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To: Joan Osland Graffius who wrote (49642)	5/7/2000 8:59:00 AM
From: Zeev Hed	Read Replies (2) \| Respond to of 99985

Joan, the point I was making with "wise use of debt", was that IBM is paying interest (which is tax deductible) at a rate which is much smaller than their after tax return on total assets (including assets acquired with that debt), thus they are using other people's money to make money. The caveat is to make sure that their interest liabilities coverage is such that they will not be put in a pinch if economic conditions sour. I think that IBM has a debt coverage ratio of 16 or so, quite safe. As for stock buy back, I do not think it is done for supporting the stock, it is done to pay out dividends without double taxation. Must must have acquired in the last 4 years some $10 Billion of its stock in a number of buy backs, this is a $10 Billion tax free dividend or close that a $15 billion after tax dividend, which means that MRK is paying not $1.16/year, but closer to $2.75 in pretax dividends (and growing conmsistently year after year). The decision on taking on debt should not be based on which corporate cash needs this debt is acquired for, but on the pure merit of the debt (is it well "covered" and is its cost substantially lower than the internal rate of return on assets of the company). Zeev

To: Joan Osland Graffius who wrote (49642)	5/7/2000 9:36:00 AM
From: Haim R. Branisteanu	Read Replies (1) \| Respond to of 99985

Joan I have a better asset for you rail road cars ..... depreciation 7 years life of assets 25 years...... maintenance cost dismissal ..... rents just flow in. Those tax breaks made Carl Ichan tons of money. AS to debt for stock buy back I ma with you. Stock should be bought back only from free cashflow, but preferable no more than your profits as the free cash flow should be set aside for modernization and equipment replacement. IMHO wisdom in business is a hindsight think ...... as the one taking risk and wins is a winner and the one taking risks and incurs losses ...... well he is an failure <GGGGG> and that from another old fashioned person <GGGG> Haim