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Compute the effective annual return

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Reference no: EM132585431

Avicorp has a $14.3 million debt issue? outstanding, with a 5.8% 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 94 % of par value.

Question 1: What is? Avicorp's pre-tax cost of? debt? Note: Compute the effective annual return.

Question 2: If Avicorp faces a 40 % tax? rate, what is its? after-tax cost of? debt?

?Note: Assume that the firm will always be able to utilize its full interest tax shield.

Reference no: EM132585431

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