Debt issue outstanding-what is its after-tax cost of debt

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Reference no: EM131047547

Avicorp has a $12.6 million debt issue outstanding, with a 5.9% 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 pretax cost of debt? ( round answer to 4 decimal places)

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

Reference no: EM131047547

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