# Question

The Zephyr Corporation is contemplating a new investment to be financed 33 percent from debt. The firm could sell new $ 1,000 par value bonds at a net price of $ 945. The coupon interest rate is 12 percent, and the 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 Zephyr for bonds?

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