1). 3.3

Opportunity and risk of Business leverage. The company has already invested heavily in developing a national infrastructure comprised of hybrid learning centers that are able to accommodate the specific regional needs of its students. This approach appears to represent an edge over its competition, and makes the company all the more worthy of formal consideration for investment purposes. According to the company's Form 10-Q from July 29, 2005, ITT intends to continue expanding by: a) opening new institutes; b) adding learning sites to existing institutes; c) offering a broader range of technology and non-technology programs both in residence on campus and online at our existing institutes; d) increasing the number of our institutes that offer bachelor degree programs; and e) pursuing new and expanded alliances with both domestic and international educators. In addition, "We also intend to further expand our Hybrid Delivery Model by teaching more of the courses in each of our programs online over the Internet" (Form 10-Q, 2005, p. 3).

4.0

Business Risk Assessment.

According to the company's Form 10-Q filed with the Securities and Exchange Commission (SEC) on April 26, 2005, ITT has an ongoing Department of Justice investigation that could result in monetary fines or penalties or other sanctions, including the loss of eligibility to participate in student financial aid programs, that could materially adversely affect the company's financial condition and operations. Furthermore, the results of the SEC inquiry into the allegations being investigated by the DOJ could result in the restatement of ITT's financial statements, monetary fines or penalties or other sanctions that could materially adversely affect their financial condition and operations. Finally, the outcome of a securities class action, shareholder derivative and books and records inspection lawsuits filed against ITT, if adversely decided, could have a material adverse effect on the company's financial condition and results of operations (Form 10-Q for ITT Educational Services, Inc., 2005).

5.0

Cost of Capital

Table 7. Shareholder's Equity.

Period Ending

31-Dec-04

31-Dec-03

31-Dec-02

Misc Stocks Options Warrants

Redeemable Preferred Stock

Preferred Stock

Common Stock

Retained Earnings

293,910

221,400

184,409

Treasury Stock

(113,501)

(124,241)

(131,430)

Capital Surplus

59,657

52,688

40,393

Other Stockholder Equity

(5,532)

(4,263)

(4,888)

Total Stockholder Equity

235,074

146,124

89,024

Net Tangible Assets

$220,361

$135,280

$78,

Source: Yahoo! Finance, 2005.

6.0

Return to shareholders.

Table 8. Financing Activities, Cash Flows Provided By or Used In

Dividends Paid

Sale Purchase of Stock

14,956

(2,392)

(30,850)

Net Borrowings

Other Cash Flows...

Each of the company's institutes is: (a) authorized by the applicable education authorities of the states in which it operates and recruits and (b) accredited by an accrediting commission recognized by the U.S. Department of Education (Form 10-Q, 2005, p. 2). The company also design all of its own educational programs in collaboration with employers to help graduates prepare for careers in various fields involving their specific areas of study. The Form 10-Q states that: "As of June 30, 2005, all of our program offerings were degree programs. We have provided career-oriented education programs since 1969 under the 'ITT Technical Institute' name" (Form 10-Q, 2005, p. 2). During the second quarter of 2005, the company reports that it opened one new institute and added two new learning sites to existing institutes (learning sites are institute locations where educational activities are conducted and student services are provided away from the institute's campus); ITT expects to open up to three additional new institutes and add up to two new learning sites by the end of 2005 (Form 10-Q, 2005, p. 2).
8.0

Financial Controls

The company's 2005 Annual Report states that it intends to add to its existing 52 institutes by opening three or four new ones as well as up to four learning sites in the remainder of 2005; however, these new institutes have historically incurred a loss during the 24-month period after the first class start date.