updated 10:03 am EDT, Fri April 26, 2013
Continues to avoid repatriating foreign cash
Apple's plan to take out a loan for its $60 billion stock buyback is about saving taxes, notes the Washington Post. Although the company has $145 billion in cash reserves, roughly two-thirds of that is situated outside the US, and Apple has so far avoided repatriating the money in order to bypass a 35 percent tax rate. Taking out a loan for $60 billion means the company must still pay interest, but this is offset by not having to pay out dividends on the shares it's reclaiming.
The Post's Allan Shoan remarks that if Apple's loan comes with an interest rate of 3 percent -- higher than the company will likely pay -- and it buys back shares at a price of $410 each, the interest per share should be about $12.30, just 10 cents more than the annual dividend payout the same share currently demands. Interest is tax-deductible however, and even with a 35 percent tax rate, it's thought that Apple could owe just $8 per share using the loan plan.