Apple Bonds - Why?

Phony Interviewer:* "Why is Apple borrowing $7 Billion when it already has $200 Billion in the bank?"

Pundit: "They got a really low interest rate (3%)"

SJR Response: Interest rate is only part of the answer.

Apple's 16.3% return on assets means that if the ~$7 Billion from the bond offer is put to productive use in the business Apple will make $931 Million additional profit each year the debt is outstanding.

The present value of that income is about $18 Billion over the (30 year) term of the bonds. They make a nearly risk free $11 Billion off the deal.

*) Anybody want to give me odds on whether this "brilliant exchange" was spontaneous or rehearsed?

#Bonds #BusinessLoans

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