At the end of last year, the new U.S. administration delivered a tax code that lowers the tax on repatriated cash to 15.5%. It also makes repatriating cash from foreign countries all but mandatory.

Apple (NASDAQ:AAPL) has long held most of its cash overseas, and it will now repatriate most of the $252 billion it holds in foreign countries. (It still needs to hold some cash overseas to fund operations as well as an escrow account for potential back taxes due in Ireland.) Apple will also have to pay around $20 billion in taxes to the U.S. government regardless of how much cash it brings back to the U.S.

So, with around $200 billion about to become much more usable for Apple, what can investors expect it to do?

Apple Store in Palo Alto

Image source: Apple.

Paying down its debt?

While Apple was racking up fat stacks of cash in overseas bank accounts, it issued a boatload of debt to fund its capital return program. Apple has about $100 billion in long-term debt that it could pay off immediately with its repatriated cash.

But Apple was able to secure very favorable interest rates on that debt. Apple benefited greatly from an extremely low interest rate environment when it issued most of those notes. It paid just $2.3 billion in interest expense during fiscal 2017. While that's very large in absolute terms, it's just a drop in the bucket for Apple.

Apple might be better off holding onto its debt and paying it off at its regular schedule. Meanwhile, the newly repatriated cash can fund the rest of its capital return program, which currently has $66 billion left before it expires next March. Apple will very likely increase its authorization once again this year as has been its practice every year since initiating the capital return program.

Increase the share buyback?

Last year, Apple committed to buy back an extra $35 billion worth of shares, increasing its total authorization to $210 billion. With its cash becoming more readily accessible, Apple could buy back additional shares this year.

UBS analyst Steven Milunovich says Apple could purchase $173 billion worth of shares over the next three years, with the largest portion coming this year. For reference, Apple has bought back $166 billion in shares over the past six years.

Other investors may prefer a bigger dividend increase, but Apple has been extremely conservative with its dividend payout, ensuring that it can raise the dividend every year. The company has consistently raised the dividend around 10% per year, and there's no reason to think the repatriated funds should change that behavior.

A big acquisition?

Apple has never been into making big acquisitions. Its largest acquisition ever was Beats Electronics, which it paid $3 billion for. It also made a $1 billion investment in Didi Chuxing -- a Chinese ride-sharing company. Other than that, it's never spent over $1 billion on an acquisition or investment.

That doesn't stop the rumor mill from churning. One analyst has already said there's a good chance Apple will buy Netflix. Indeed, there's no limit to what Apple could buy with $252 billion.

But Apple has been most successful when it focuses on a few key products. A big acquisition would likely divert Apple's attention from its core products. It's more likely that Apple will accelerate its acquisition of smaller companies to support products it's already working on. It's been devoting a lot of attention to its services business lately, and its recent acquisitions of Shazam and Buddybuild support those businesses.

No more excuses

Now that Apple is able to gain more control over how it uses its cash, it no longer has an excuse for holding such a large amount of it on its balance sheet. Investors will want to see an increase in cash usage. Whether it's paying down its debt, a bigger-than-usual bump in capital returns, more and bigger acquisitions, or a combination of all three, all of those options appear better than a pile of cash earning a couple billion dollars in interest every year.

What Apple decides to do will remain a hot topic throughout 2018 and beyond as Apple continues to generate billions in free cash flow every quarter.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.