Lastly the ROE also increased from 5.97% to 6.55%. The only negative change determined was, the decrease in earning per share from $0.83 to $0.82. Again, we note the insignificant change with the earnings per share value; however we do keep in mind that the value did in fact decrease. Overall, the stock ratios that were evaluated with this additional debt improved. Based on the ratios given, we conclude that change in MCI's capital structure would add to the shareholder value.
Lastly, we examined the effects of the tax shield that this debt would generate. With our current tax laws, there is a tax advantage for a company to be leveraged. Our tax structure allows a maximum tax rate in which at a certain point, the amount of debt generated does not grant additional tax shield. MCI has yet to hit their maximum tax rate and therefore, can still benefit from the tax advantages. The present value of the tax shield for MCI was calculated at $776 million while the interest expense on this new debt is $304 million. These numbers show that today's tax advantage dollars is more than double the cost of interest on this new debt. All of this data supports our recommendation to the board of directors that it would be beneficial for MCI to issue the 2 billion in debt in order to repurchase the company stock.