Compute effective annual return-pre-tax cost of debt

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Reference no: EM131346406

Avicorp has a $ 12.1 million debt issue outstanding, with a 6.1% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 95% of par value.

Please solve step by step

a. What is Avicorp's pre-tax cost of debt? Note: Compute the effective annual return. (round to 4 decimal places)

b. If Avicorp faces a 40% tax rate, what is its after-tax cost of debt? (round to 4 decimal places)

Reference no: EM131346406

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Compute effective annual return-pre-tax cost of debt : Avicorp has a $ 12.1 million debt issue outstanding, with a 6.1% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 95% of par value. What is Avicorp's pr..

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