Pre-tax cost of debt-compute the effective annual return

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Reference no: EM131489084

Avicorp has a $11.8 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 94% of par value. 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? a. The cost of debt is per year. (Round to four decimal places.)

Reference no: EM131489084

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