A longtime client of the firm, had called seeking advice about establishing a program to repurchase some of outstanding common stock. As Exhibit I shows, throughout most of 1995 MCI's stock had been a sluggish performer in part of shareholders. At a recent meeting of the board a growing restlessness on the part of shareholder. At a recent meeting of the board of directors, discussions had centered on repurchasing some of company's stock as a means to enhance shareholder value. One longtime director, Gavin Philips, stock as a means to enhance shareholder value. One longtime director, Gavin Philips, pushed hard to finance the repurchase by increasing MCI's debt financing. He argued Thad action would send a bold signal to the market about the future prospects of the firm. To be effective as a sing, Philips suggested that the company would need to increase its debt -equity ratio from its current level of around 36 percent to " at least twice that." He said, "Even at that debt level, MCI's debt - to- cap wold be moderate relative to the industry." He estimated that such action would require MCI to issue approximately $2 billion in additional debt. Other director,