Compute the effective annual return-pre-tax cost of debt

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MV Corporation has debt with market value of $99 million, common equity with a book value of $96 million, and preferred stock worth $20 million outstanding. Its common equity trades at $49 per share, and the firm has 5.7 million shares outstanding. What weights should MV Corporation use in its WACC

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

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

Reference no: EM131508065

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