New investment that it plans to finance using one-third debt

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Reference no: EM131013410

The Walgreen Corporation is contemplating a new investment that it plans to finance using one-third debt. The firm can sell new $1000 par value bonds with a 15 year maturity at a price of $950 that carries a coupon interest rate of 13.6 percent that is paid semi-annually. If the company is in a 34 percent tax bracket, what is the after tax cost of capital to Walgreen for the bonds?

Reference no: EM131013410

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