Compute the annual return

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Reference no: EM13267994

Avicorp has a $12.1 million debt outstanding, with a 6.2% 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.

A. What is Avicorp's pre-tax cost of debt? Note: Compute the annual return.

B. If Avicorp's faces a 40% tax rate, what is its after-tax cost of debt?

Reference no: EM13267994

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