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Problem:

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 $945 that carry a coupon interest rate of 13.6 percent that is paid semiannually.

Required:

If the company is in a 34 percent tac bracket, what is the after tax cost of capital to Walgreen for the bonds?

Note: Provide support for your rationale.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91162118

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