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 with a 15-year maturity at a price of $954 that carry a coupon interest rate of 12.2 percent that is paid semiannually. If the company is in a 34-percent tax bracket,
Task:
Question: What is the after-tax of capital to Walgreen for the bonds? Show all workings and provide step by step solution.