The Walgreen Corporation is contemplating a new investment that it plans to finance using one-third debt. The firm can sell new $1,000 par value bonds with a 15-year maturity at a price of $950 that carry a coupon interest rate of 13 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?
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