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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (58147)	4/30/1999 8:01:00 AM
From: valueminded	Respond to of 132070

Mike: I read your example, but it does not seem to jive with my calculations. Please read and point error in my ways. thanks Consider company with 1000 shares outstanding priced at 200/share Earnings are 1,000 for the year yielding a pe of 20. They borrow 10,000 at 6% and buyback 50 shares Now the 1,000 earnings are spread over 950 shares yielding a pe of 19 if we ignore the interest costs. If we reduce the earnings by the interest costs however, we see that earnings have dropped to 400 so pe in realty should move higher.