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Microcap & Penny Stocks : TSIS: WHAT IS GOING ON? -- Ignore unavailable to you. Want to Upgrade?

To: BarbaraT who wrote (5025)	1/15/1999 12:56:00 PM
From: jmt	Respond to of 6931

Barbara: The advantage for debt is simple. Historically the stock market has provided returns of 12%. Therefore, a company issuing equity to raise cash assumes a cost of 12% annually (appreciation plus dividends) to the time it may repurchase those shares. To use debt rather than equity is much less expensive. Debt at 8% less a 40% tax exclusion is now borrowing at 5%. And the only loser is the government, who get less taxes, and TSIS retaining more cash. There are many sound financial reasons to use debt over equity, and many financially savvy company's use debt to save on taxes and enhance cash flows. Also, if the company were to borrow and repurchase shares, you would get the direct benefit as a shareholder, increasing earnings per share from less shares outstanding. The increase in Earning per Share would be greater than the reduction in earnings due to interest expense, again resulting from the tax benefits of debt. jmt