New investment that plans to finance using one-third debt

Assignment Help Financial Management

Reference no: EM13878430

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 $947 that carries a coupon interest rate of 12.8 percent that is paid semiannually. If the company is in a 34 percent tack bracket, what is the after tax cost of capital to Walgreen for the bonds?

Reference no: EM13878430

Questions Cloud

What is the nal of leasing : High electricity costs have made Farmer Corporation’s chicken-plucking machine economically worthless. Only two machines are available to replace it. The International Plucking Machine (IPM) model is available only on a lease basis. What is the NAL ..

Calculate the unit cost and the total cost : Lima Company manufactured 30,000 units of product last month and identified the following costs associated with the manufacturing activity:

Biggest challenge in terms of cross-cultural management : the biggest challenge in terms of cross-cultural management

What is the revaluation model of accounting : Intangible assets acquired via a separate acquisition are always recognised - how is an intangible asset acquired as part of a business combination measured for initial recognition? Why?

New investment that plans to finance using one-third debt : 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 $947 that carries a coupon interest rate of 12.8 percent that ..

Important features of an effective communication : What do you consider to be the most important features of an effective communication? Explain your choices

Why free-rider problem greater in a large group than small : Explain why the "free-rider" problem is likely to be greater in a "large" group than in a "small" group.

What are the floatation costs for issuing preferred share : The preferred stock of Gator Industries sells for $34.63 and pays $2.77 per year in dividends. What is the cost of preferred stock financing? What are the floatation costs for issuing the preferred share and how should this cost be incorporated into..

Why free-rider problem greater in a large group than small : Explain why the "free-rider" problem is likely to be greater in a "large" group than in a "small" group.

User Account

All Pages