After tax cost of capital to bonds


The Walgren Corporation is contemplating a new investment to be financed 33 percent from debt. The firm could sell new $1000 par value bonds at a net price of $950. The coupon interest is 13 percent, and bonds would mature in 15 years. If the company is in a 34 percent tax bracket, what is the after tax cost of capital to Walgren for bonds?

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Finance Basics: After tax cost of capital to bonds
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