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Ken -

Thanks for your patience.

Yahoo is useful, but when constructing our two alternate income statements we want to go to the source. Here is the link:

Okay, so you want to talk about taxes. Here's my take. At year-end 2006 and 2007 CLF had $117M and $62M, respectively, of deferred tax assets, which includes both current and long-term. Meanwhile, deferred tax liabilities were $118M and $189M, respectively. Thus, net deferred tax assets were $(1)M and $(127)M, respectively. CLF's investment in net deferred tax assets in 2007, therefore, was $(126)M. This is a source of cash in the enterprising income statement. We subtract this source of cash from the provision for taxes; i.e., GAAP taxes of $84M minus the negative investment in net deferred tax assets of $126M equals enterprising taxes of $(42)M.

In plain English, because CLF's deferred tax assets shrank (a reduction of assets is source of cash) and its deferred tax liabilities increased (an increase in liabilities is also a source of cash), the balance sheet changes turned a tax expense into income. Many companies enjoy negative investments in deferred tax assets, but normally the negative investment isn't big enough to turn impact the tax provision as is the case with CLF in 2007.

Your other questions are good ones, but before we proceed I want to make sure I answer you tax question fully.

As for the cost of equity, I tend to use the 10-year Treasury yield plus 500 basis points, or a minimum of 10.0%. As an additional layer of security, I also buy companies when they sell for 50%-75% of intrinsic value.

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