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Apple Inc. currently has market capitalization of $640 billion, 5.4 billion shares outstanding, and debt outstanding of $80 billion. Suppose the market expects Apple to
Apple Inc. currently has market capitalization of $640 billion, 5.4 billion shares outstanding, and debt outstanding of $80 billion. Suppose the market expects Apple to maintain this level of debt forever. Apples marginal tax rate is 25%. Today, Apple surprises the market by announcing it will issue an additional $120 billion in debt and will maintain its new level of debt going forward. What is the effect of the announcement on Apples stock price?
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