Beginning in 2009, Microsoft began to borrow large amounts of money by issuing bonds. News articles at the time cited Microsoft's desire to raise money to fund acquisitions and to repurchase stock. Yet analysts also noted that Microsoft's cash holdings remained high. Indeed, Microsoft's cash holdings were larger than the amount of money that the company borrowed by issuing bonds. Which of the following is the best argument for Microsoft to issue debt?

• Microsoft's taxable income was high enough to make the debt tax shield attractive.
• If Microsoft were to face financial distress, the associated costs would be small.
• Microsoft's stock was undervalued and the firm's managers did not want to issue equity.
• Microsoft receives many tax breaks and pays little in corporate taxes.