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Plans to finance using one-third debt

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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 carry a coupon interest rate of 12.7 percent that is paid semiannually. 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: EM131014436

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