Capital Structure
http://www.wsj.com/articles/microsofts-bond-sale-is-largest-of-the-year-at-10-75-billion-1423513035?mod=djem_jiewr_FN_domainid
Read the above article and answer the below questions.
1. Why do software companies and drug makers tend to have low levels of debt?
2. Why did Microsoft issue such a large size of bond even though it doesn’t appear to need the cash? What capital structure theory presented in the textbook can explain this issuance.
3. Compared to Apple, Microsoft’s bond has a higher or lower rating? Is the yield on the bond of Microsoft compared to the yield on the bond of Apple consistent with the implication of the bond rating?