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.
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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.
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