Some analysts have suggested that Apple should raise debt to address its foreign cash problem. While many investors may see this as counterintuitive, issuing debt could potentially reduce Apple's weighted average cost of capital, or WACC, since debt typically carries lower costs relative to equity. However, the cost of debt is explicit, while the cost of equity is implicit, which makes it a difficult decision to make.
In the video below, Fool contributor Evan Niu, CFA, explains how debt could actually benefit Apple.
There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.
The article How Debt Could Make Sense for Apple originally appeared on Fool.com.Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.